SINGAPORE, 3 November 2004 — Saudi Aramco has cut premiums on naphtha for delivery during the first six months of 2005 to its Asian buyers by between 10 and 42 percent partly due to competition from India, trade sources said yesterday.
The Middle East oil giant lowered the term premium on its popular A-180 naphtha, which has a high ethylene yield, to $17 a ton above its own price formula, from $19 for second-half 2004 supply.
Aramco’s biggest term lifters of the A-180 grade include Malaysia’s Titan Petrochemicals Sdn. Bhd. and Taiwan’s Formosa Petrochemicals Corp. “Aramco has had very good premiums for quite some time but petchem margins are coming down and there is so much naphtha in the market these days. Some barrels remain unsold,” said a trader in Singapore.
Traders said petrochemical margins are starting to get squeezed as ethylene struggles to stay above $1,000 a ton. Higher exports from India and the Middle East have weighed on Asian naphtha prices and end-users have fought to lower premiums on term barrels.
India raised exports to up to 300,000 tons a month since April as power plants switch to cheaper natural gas and refiners run at maximum capacity.
Aramco, Asia’s top supplier of naphtha, used in cracking facilities to produce ethylene and propylene, the basic building blocks for the petrochemical sector, has been meeting with about 16 customers in Bahrain since Saturday to renegotiate term prices.
For Aramco’s A-310 naphtha supply, the company’s biggest naphtha volume on offer, prices were slashed to $7.25 a ton, from $12.50. “The A-310 premium was cut nearly in half, mainly because of the high mercury content,” a trader in Seoul said.
Aramco has roughly 3.5 million tons of A-310 naphtha to export on a term and spot basis in 2005. Aramco has also lowered its full-range naphtha from Rabigh to $12.25 a ton, from $15. Its Jubail chemical naphtha premium has been lowered to $10.50 a ton from $14. Kuwait Petroleum Corp. (KPC), Asia’s second-biggest naphtha supplier, also lowered its term prices this week, setting them at a premium of $13 a ton to Middle East spot quotes for December 2004 through November 2005 supply, down from $17 set for one-year supply from August.
Meanwhile, Saudi Aramco has raised its November contract price (CP) for propane to $463 a ton, up $65 from the October level, a company source said on Monday.