Asian naphtha flat price drops 14.6% to lowest since 2008

Singapore — The benchmark CFR Japan naphtha flat price tumbled 14.6% day on day to its lowest in more than 12 years at $263.50/mt Monday, led by the decrease in crude prices and weakening fundamentals.

The naphtha benchmark fell $44.875/mt and is now down $175.625/mt, or 40%, since the start of March, according to S&P Global Platts data. It was last lower on December 5, 2008 at $256/mt.

The Asian naphtha complex has weakened from decreased demand caused by the escalating coronavirus pandemic since early February and the unexpected shutdown of Lotte Chemical's Daesan steam cracker on March 4.

At 4:30 pm Singapore time (0830 GMT), front month May ICE Brent crude futures were $3/b (8.7%) down from Friday's settle to stand at $31.57/b at Monday's Asian close.

The drop in flat price for naphtha last week already attracted bargain hunters to snap up cargoes, as at least five steam crackers had purchased H2 April delivery cargoes last Thursday.

Market participants said there was still significant uncertainty, particularly with regards to downstream demand, even with operations at Chinese refineries and downstream plants recovering.

Sources said logistical challenges persisted, and there were concerns on US demand for petrochemical products as the coronavirus outbreak has reached a pandemic level.

"[Countries] are cautious because of the virus spread and issued additional precautions about ships calling at their ports, being extra cautious of importing cases into their country," said a naphtha end-user source.

The naphtha derivatives market reflected softer sentiment, as the April/May Japan naphtha timespread deepened its contango structure, falling $2.50/mt to minus $3.50/mt at Monday's Asian close.

The front month time spread was last lower on December 30, 2018 when it was minus $4.75/mt, according to Platts data.

Further demonstrating the weakening market, the CFR Japan physical naphtha crack against front-month ICE Brent crude futures stood at $26.725/mt at Monday's Asian close, down $22.375/mt day on day, and at a six-month low.

The crack was last lower on September 16, 2019 when it was $19.95/mt. It averaged $61.539/mt over February.