asia

Europe-Asia naphtha arbitrage volumes fall to 11-month low for Sept loadings | S&P Global Platts


Highlights

Europe to Asia flows fall for third straight month for Sept loadings

Narrow East-West spread caps arbitrage opportunity

European propane to naphtha on paper at multimonth high

Tight supply decreased the flow of European arbitrage naphtha to Asia, slashing volumes for the September loading program by 20% month on month, while thin volumes are also expected for the October-loading program on strong regional demand in Europe.

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September-loading Europe to Asia naphtha shipments was around 1.215 million mt, down from 1.525 million mt for August-loaded volumes, according to data from market sources and S&P Global Platts cFlow. The monthly volumes were last lower for the October 2020 loading program which amounted to around 1.19 million mt, Platts data showed.

While lower volumes were expected for the September loading program on the back of decreased demand from planned turnaround in Asia in October, traders also found it economically unviable to send arbitrage naphtha to Asia and kept cargoes to meet strong demand appetite in Europe.

The sparse volumes could continue for the October loading program, as the key spread between front month October naphtha C+F Japan cargo versus CIF NWE cargo – an indicator of arbitrage opportunity – was at $11.50/mt on Sept. 28 European close, down from $12.75/mt the week before, Platts data showed.

Chartering activity had begun for the October-loading program, with five Long Range II tankers and one Long Range I tanker heard booked to load around 460,000 mt of European naphtha in the first half of October for Asia-bound voyages, market sources said.

An uptrend in freight was also a deterrent to charterers, as LR2 Mediterranean-Japan freight had climbed to a five-month high of $2.05 million on Sept. 27, but has since edged marginally lower at $2 million on Sept. 28, Platts data showed.

A naphtha cargo from Europe typically takes around a month to arrive in North Asia via the Suez Canal, shipping sources said.

LPG upswing drives naphtha demand

Demand in Europe was mainly for petrochemical feedstock grades, as LPG alternatives were showing increased premiums in line with rising demand for heating.

Concurrently, an uptrend in natural gas prices led several domestic refiners resorting to LPG as a refinery fuel.

An anticipated further decline in outdoor weather temperatures both in Asia and in Europe will likely sustain or even exacerbate current trends, favoring in naphtha as a petrochemicals feedstock during winter months.

The front month propane swap contract closed at a $95.75/mt premium against equivalent naphtha Sept. 28, up from a $59.50/mt premium on the previous assessment, Platts data showed. This was the highest premium seen since April 21, 2020 at the heart of the pandemic.

Demand for naphtha as a petrochemical feedstock was also strong in both Asia and Europe due to positive olefin margins supporting high run rates at steam crackers.

USGC supply recovers

Asian naphtha was earlier boosted by supply tightness caused by storm damage curtailing US Gulf Coast output. Apart from Europe, North Asia’s petrochemical production hub also relies on the US for arbitrage naphtha cargoes. Market participants said while Asia remains short on naphtha because of firm demand for the current November delivery cycle, the recovery in USGC output has improved supply.

Europe in turn, particularly NWE, has once again begun attracting USGC flows which have in turn contributed to a softer sentiment relatively to previous weeks. Also, traders had sent some Mediterranean and Black Sea cargoes to NWE rather than to Asia due to the uneconomical arbitrage.

The softer market was reflected in the CFR Japan naphtha physical crack against front-month ICE Brent crude futures, which fell $9.15/mt week on week to $126.825/mt on Sept. 28 Asian close, Platts data showed.

“We are short on paraffinic naphtha [In Asia], the market has bullish and bearish factors but is cooling down because the flat price is too high,” said a Singapore-based naphtha trader.

The recent upswing in crude markers pushed benchmark C+F Japan naphtha $30/mt higher week on week to a near three-year high of $727.875/mt at the Sept. 28 Asian close, Platts data showed. The naphtha benchmark was last assessed higher at $728.625/mt on Oct. 5, 2018.

Europe to Asia naphtha fixtures


Vessel


Cargo


Laycan


Voyage


Freight


Charterer


BW Yarra


60


NA


Oct15


Tuapse-East


$1.725m


ATS


Front Altair


80


NA


Oct10


Novorossiysk-Japan


$2.2m


Litasco


Pink Stars


80


NA


Oct5


Taman-Japan


Own Prog


Bp


Hua Lin Wan


80


NA


Oct4


Ust Luga-East


$2.125m


Novatek


STI Sloane


80


NA


Oct2


Eleusis-Japan


$1.95m


ATS


Yuan Ju Wan


80


NA


Oct1


Ust Luga-East


$2.2m


Novatek


Seriana


80


NA


Sep30


Skikda-Japan


Own Prog


Trafigura


Hua Lin Wan


80


NA


Sep29


Ust Luga-Japan


rnr


Novatek


SKS Doda


80


NA


Sep29


Tuapse-Japan


$1.95m


ATS


Polar Unicorn


60


NA


Sep22


Huelva-Brazil, UKC, TA, Japan


w107.5, w97.5, w92.5, $1.55m


Cepsa


Kmarin Reason


55


NA


Sep21


Skikda-Japan


Own Prog


Bp


Kleon


80


NA


Sep20


Novorossyisk-Japan


Own Prog


Trafigura


SKS Driva


80


NA


Sep19


Eleusis-Japan


$1.65m


ATS


STI Madison


80


NA


Sep16


Novorossyisk-Japan


$1.825m


Petraco


Bahra


80


NA


Sep14


Tuapse-Japan


$1.8m


Socar


Kapten Caroq


80


NA


Sep13


Agioi-Japan


$1.675m


Trafigura


Seaodyssey


80


NA


Sep12


Skikda-Japan


$1.7m


STASCO


Lilac Victoria


60


NA


Sep12


Huelva-Japan


$1.6m


Cepsa


Prosky


80


NA


Sep8


Ust Luga-Japan


$2.2m


Novatek


Suvretta


80


NA


Sep8


Skikda-Japan


Own Prog


Trafigura


STI Lobelia


80


NA


Sep6


Tuapse-Japan


$1.875m


ATS


Captain Spiro


80


NA


Sep6


Taman-Yeosu


rnr


cnr


Zantoro


80


NA


Aug30


Skikda-Japan


$1.63m


Total


BW Neso


80


NA


Aug27


Ust Luga-Japan


rnr


Novatek


King Philippos


80


NA


Aug25


Tuapse-Japan


$1.75m


Trafigura


Timberwolf


80


NA


Aug24


Skikda-East


rnr


cnr


STI Rose


80


NA


Aug18


Novorossiysk-Japan


$1.75m


Bgn


STI Grace


80


NA


Aug18


Eleusis-Ulsan


$1.6m


ATS


STI Broadway


80


NA


Aug16


Skikda-Japan


rnr


cnr


Sea Shell


90


NA


Aug14


ARA-Japan


$1.85m


Vitol


Navig8 Gallantry


35


NA


Aug13


Skikda-Yanbu


$625k


Total


Front Panther


80


NA


Aug10


Ust Luga-Japan


$1.875m


Novatek


Sunda


60


NA


Aug10


Huelva-Japan


$1.6m


Cepsa


Prostar


80


NA


Aug10


Skikda-Japan


Own Prog


Stasco


BW Neso


80


NA


Aug10


West-East


rnr


cnr


Navig8 Promise


80


NA


Aug10


Tuapse-Japan


$1.8m


Bp


Alburaq


80


NA


Aug10


Greece-Japan


$1.6m


ATS


Alpine Confidence


80


NA


Aug8


ARA-Japan


$1.7m


Vitol


Al Ruwais


80


NA


Aug7


Black Sea-Japan


$1.75m


Trafigura


STI Elysees


80


NA


Aug6


Novorossiysk-Japan


rnr


cnr


Pacific A Dorodchi


80


NA


Aug4


Skikda-Japan


$1.575m


Total


BW Yangtze


60


NA


Aug1


Tuapse-Brazil, Japan


w90, $1.675m


Trafigura

Key: NA= naphtha, rnr= rate not reported, cnr= charterer not reported

Source: Industry sources, S&P Global Platts cFlow



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