September naphtha shipments from West to exceed Asia demand

SINGAPORE, Aug 23 (Reuters) - Shipments of naphtha from the West, including Europe and the Mediterranean, to Asia in September are forecast to exceed Asian demand amid maintenance at naphtha crackers and as petrochemical producers use alternative feedstocks.

Asia is expected to receive some 1.3 million tonnes of naphtha from the West next month, four industry sources said on Friday.

That amount will exceed the demand from regional steam crackers. Naphtha is the primary feedstock used by petrochemical manufacturers to make the chemical precursors for plastics and polyester fabrics.

"This is still too much supply for September ... Asia needs probably 1 million tonnes," said a Singapore-based industry source who tracks the eastbound cargoes.

Naphtha supply has outpaced demand this year because of scheduled cracker maintenance, cracker outages in Japan and South Korea and the prolonged use of cheaper alternative feedstock liquefied petroleum gas.

That has pressured the profit margin, known as the crack spread, for naphtha versus Brent crude oil to an average of $35.50 a tonne for this year, set for the lowest yearly average since Reuters data started in April 2008. <NAF-SIN-CRK>

This month, Taiwan's Formosa Petrochemical Corp, Asia's top naphtha importer, and Chandra Asri, which operates Indonesia's only steam cracker, are down for maintenance until late September, reducing regional naphtha demand by at least 300,000 tonnes next month.

"We estimate that there will be surplus naphtha barrels in August/September," said Matthew Chew, principal oil analyst at IHS Markit, although the oversupply in September is expected to be lower than August.

Chew said that the September supply surplus is expected to be around 100,000 tonnes versus 150,000 to 200,000 tonnes in August.

Asia is structurally short of naphtha and relies on imports from the Middle East and the West to plug the shortfall.

August cargoes from the Middle East to Asia were estimated at up to 3 million tonnes, higher than the year-to-date monthly average of 2.3 million tonnes, according to a weekly report by Refinitiv Oil Research.

Supplies from India, Asia's key spot supplier, were also higher in August at more than 650,000 tonnes versus below 450,000 tonnes in July.

(Reporting by Seng Li Peng; editing by Christian Schmollinger)

2019-08-23 10:19:21

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