Month: August 2018

Aromatics Naphtha | Daily Report | 23rd August 2018

Chemical Industry

The Asian naphtha complex failed to receive much support Wednesday amid the excess surplus in the region, and subdued demand in the North. Apart from the tepid demand on paraffinic naphtha front, the requirement for heavy full range naphtha slowed substantially, contributing to the pullback on any support to the fundamentals, a market source said.

Competitive prices of regional condensates and light crude oil had drawn away splitter users’ earlier attraction to heavy full range naphtha. Such weakness was reflected in the paper market, as the September/October Mean Of Platts Japan naphtha swap time spread fell 25 cents/mt to plus $2/mt Monday.

The front-month time spread touched the same low on February 9. At 0300 GMT Wednesday, the spread was pegged at the same level at plus $2/mt. Looking West, arbitrage opportunities to send barrels to the East appeared grim as Asian naphtha cash differentials had weakened.

While the September-arrival naphtha arbitrage volume could not be discerned. Market sources said the combined volume in August and September would determine whether the Asian naphtha complex could reverse the oversupply situation.

“East [is trying] to shut the arb gate. Until East could digest the supply overhang, [bearish] sentiments will still prevail,” a naphtha trader said.

Separately, state-owned Indian Oil Corp. is offering 35,000 mt of naphtha, ex-Chennai, for loading over September 17-19, market sources said. The tender was heard to be expiring August 23, with next-day validity.

Privately-owned Reliance Industries was heard to have sold a 55,000 mt minimum 70% paraffin naphtha clip, to a Japanese buyer, for September 12-13 loading from Sikka, one market source said. The company declined to comment on details of the trade.

Meanwhile, Indonesia imported 171,877 mt of naphtha in June, down 29.75% month on month but up 1.71% year on year, detailed figures from Statistics Indonesia showed last week. For June, Indonesia has also turned its focus back to lower octane gasoline imports– primarily 88 RON grade — from the higher priced 92 RON and 95 RON gasoline grades.

Indonesia has capped monthly 88 RON gasoline imports at below 500,000 mt over last December to April this year but boosted imports in May to 596,878 mt. Indonesia imported 583,096 mt of low octane gasoline in June, while imports of gasoline with an octane number between 90 RON and 97 RON fell sharply from 688,735 mt in May to 581,160 mt.

“Due to the higher crude and gasoline prices, they are more focused on the 88 RON grade,” a market source with knowledge of Pertamina’s recent fuel purchase said.

China announces 25% tariff on US-origin benzene – 10th August – Daily Chemicals Report

phenol price updates

FOB Korea benzene inched lower by $1.33/mt week on week to $874.67/mt Friday, despite a notable increase in inquiries from buyers in China and Taiwan. The bearishness in the market over the week leading up to Friday was largely due to weakness in upstream crude oil, with ICE October Brent crude futures falling $1.49/b week on week to be assessed at $71.74/b at 0830 GMT Friday.

The Downtrend

The downtrend in global benzene prices also dampened sentiment, with October FOB USG paper down 2 cents/gal week on week at 298 cents/gal Thursday, or $891.02/mt. Benzene CIF ARA was assessed lower by $7/mt over the same period to $862/mt Thursday.

With price spreads between the US and EU against Asia at $16.35/mt and minus $12.67/mt respectively, the arbitrage from Asia to these regions was closed Friday. Despite weak spot demand from US and EU, demand from China was heard strong this week, with trades for September-arrival benzene heard last concluded at $885/mt CFR China.

Weakening Chinese Yuan

Sellers in the market noted that Chinese end-users were keen to receive September cargoes earlier in the month, in a move contrary to the situation in first-half 2018. The pickup in demand from China was a welcome move, as end-users were earlier heard mulling a weakening Chinese yuan currency, amid ongoing exchange
rate volatility as the US-China trade war continues.

The yuan/US dollar exchange rate stood at 6.8395 Friday, up slightly from 6.8322 last Friday. Strength in East China’s domestic prices resulted in a narrowing price spread between domestic cargoes and import cargoes. Prompt cargoes were assessed higher by Yuan 140/mt week on the at Yuan 7,130/mt Friday, or $881.06/mt on an import parity basis, while balance-August cargoes were higher by Yuan 120/mt over the same period at Yuan 7,160/mt ($884.77/mt).

September domestic cargoes rose Yuan 120/mt week on week to Yuan 7,190/mt ($888.48/mt). Import cargoes on a CFR China basis were assessed higher by $9/mt week on week at $892/mt Friday. Over in the Southeast Asia market, a FOB Southeast Asia tender for any September-loading was heard to have been awarded at a discount of $16-$19/mt to the benchmark FOB Korea marker.

China announces 25% tariff on US-origin benzene

However, with demand from China improving, sellers in the Southeast Asian region were heard expecting sell tenders to be awarded at a smaller discount to FOB Korea moving forward. Amid an escalation of the US-China trade war, a notice by China’s Ministry of Commerce released late Wednesday announced a 25% tariff, effective August 23, on US-origin benzene heading toward China.

Included in the list was phenol and acetone, downstream products of benzene. However, the tariff was expected to have little effect on the supply of benzene to China, as the country imports little from the US. In 2017, China imported just 24,411 mt of benzene from the US, which accounted for 0.98% of total imports in 2017.