China to Seek up to 90,000t February Naphtha on Shortage
China, normally a net naphtha exporter, has emerged to seek spot cargoes of the petrochemical feedstock for February delivery to fill a shortfall in domestic production, regional traders said on Tuesday.
Traders estimated that the country could need 60,000–90,000t of naphtha to plug the gap, as its top refiners cut runs to their lowest in about two-and-a-half years due to slow overall fuel demand.
"Some of the naphtha has also been used as a gasoline blendstock, as sellers take advantage of the lucrative auto fuel prices," a Singapore-based trader said.
This has compounded the naphtha supply woes in China and the rest of Asia, prompting traders to say that the recent naphtha recovery ahead of the Lunar New Year could stretch beyond February into March.
"I don't usually get enquiries from China, but in the last two weeks, requests started streaming in (from Eastern China)," said another trader.
Naphtha crack spreads – premiums or losses obtained from refining Brent crude into the petrochemical feedstock – had rebounded strongly to $55.38 a tonne premium on Monday, versus a historical low of $189.75 discount on 4 November, when demand was in a slump, led by China's absence.
Strength to last to March
The world's second-largest energy consumer exported a total of about 1.46 million tonnes of naphtha between January and November 2008, and imported a total of 546,302t for the same period, or about 50,000t a month.
This reflects a surplus of 913,689t of the feedstock last year versus an excess of 670,789t for 2007.
Although a net exporter of naphtha, China faced sporadic shortages in August and November last year, official data showed.
In November, China's imports exceeded exports by 10,881t.
"It is very hard to tell how many cargoes China needs (for February), but it will definitely need more than 60,000t," the first trader added.
The second trader estimated that China could need about 90,000t of naphtha to fill the void.
These shortages came at a time when South Korean buyers are aggressively seeking spot barrels as they ramp up crackers' output to cash in on the Lunar New Year festive demand. Overall, cracker output in South Korea – which has a total nameplate capacity of about 7.3 million tonnes of ethylene a year – were raised to an average of 90–95% compared to 70–75% in November.
Unlike earlier expectations, the strong naphtha demand could extend beyond the festive period.
"Demand could still be there in March, slowly tapering off in April," said an Asian seller, who added that a slump could follow from May, as the global economic crisis deepened.
By Seng Li Peng, Reuters. (www.chemicals-technology.com)
Traders estimated that the country could need 60,000–90,000t of naphtha to plug the gap, as its top refiners cut runs to their lowest in about two-and-a-half years due to slow overall fuel demand.
"Some of the naphtha has also been used as a gasoline blendstock, as sellers take advantage of the lucrative auto fuel prices," a Singapore-based trader said.
This has compounded the naphtha supply woes in China and the rest of Asia, prompting traders to say that the recent naphtha recovery ahead of the Lunar New Year could stretch beyond February into March.
"I don't usually get enquiries from China, but in the last two weeks, requests started streaming in (from Eastern China)," said another trader.
Naphtha crack spreads – premiums or losses obtained from refining Brent crude into the petrochemical feedstock – had rebounded strongly to $55.38 a tonne premium on Monday, versus a historical low of $189.75 discount on 4 November, when demand was in a slump, led by China's absence.
Strength to last to March
The world's second-largest energy consumer exported a total of about 1.46 million tonnes of naphtha between January and November 2008, and imported a total of 546,302t for the same period, or about 50,000t a month.
This reflects a surplus of 913,689t of the feedstock last year versus an excess of 670,789t for 2007.
Although a net exporter of naphtha, China faced sporadic shortages in August and November last year, official data showed.
In November, China's imports exceeded exports by 10,881t.
"It is very hard to tell how many cargoes China needs (for February), but it will definitely need more than 60,000t," the first trader added.
The second trader estimated that China could need about 90,000t of naphtha to fill the void.
These shortages came at a time when South Korean buyers are aggressively seeking spot barrels as they ramp up crackers' output to cash in on the Lunar New Year festive demand. Overall, cracker output in South Korea – which has a total nameplate capacity of about 7.3 million tonnes of ethylene a year – were raised to an average of 90–95% compared to 70–75% in November.
Unlike earlier expectations, the strong naphtha demand could extend beyond the festive period.
"Demand could still be there in March, slowly tapering off in April," said an Asian seller, who added that a slump could follow from May, as the global economic crisis deepened.
By Seng Li Peng, Reuters. (www.chemicals-technology.com)
