Asia's naphtha crack rose to a three-day high of $111.65 a tonne on Wednesday, supported by firm demand driven by a lack of affordable liquefied petroleum gas (LPG) and high production rates at petrochemical units. LPG, also used for heating, can replace 5 percent to 15 percent of naphtha in some Asian petrochemical units, but high prices make it non-economical for petrochemical makers to make the switch.
"There are no incentives to switch to spot LPG at all," said one trader based in north-east Asia. In view of this, Asia would be able to mop up the estimated 2 million tonnes of naphtha arriving in December from the West, including Europe and the Mediterranean.
"Some months, we see Asian demand for western cargoes falling to as low as 1.3 or 1.4 million tonnes, but we need about 2 million tonnes in December," a Singapore-based trader said. "So the amount of cargoes coming in is just right to cater to demand," he added. Malaysia-based Titan is seeking 25,000 tonnes of naphtha for December 16-31 arrival at Pasir Gudang, traders said. Titan had issued a tender last week to buy naphtha for December 16-25 arrival at Pasir Gudang, but that was likely to have been cancelled and replaced by the current tender, they added. Japan's Idemitsu this week sealed a January-June 2016 purchase deal for up to 300,000 tonnes of full-range naphtha to be delivered to Chiba and Tokuyama, traders said.
The exact price details were not clear but a few traders said the deal was at a premium, in stark contrast to the discounts South Korea, Taiwan and Malaysia had paid between August and October. Philippines-owned Petron Corp is seeking 113,000 barrels of gasoline for delivery to Malaysia ports of Port Dickson, Kota Kinabalu, Sandakan and Tawau through a tender closing on November 18. Petron operates an 88,000 barrels per day (bpd) refinery in Port Dickson, which was shut for 40-day planned maintenance in early October.
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