- Tighter supply in Asia kickstarted chartering activity for US-to-Asia naphtha arbitrage flows, amid tighter supply in Asia due to the logistical chokehold at the Suez Canal.
- While the mega container ship Ever Given was freed on March 29 and moved to a waiting area at the Great Bitter Lake.
- The Suez Canal remains closed and has a backlog of ships awaiting transit, sources said.
Wanda Wang, Marieke Alsguth and Troy Duffie write for Platts about how traders book US-to-Asia naphtha shipments amid slim arbitrage opportunities.
US Gulf Coast naphtha loading
At least 174,000 mt of US Gulf Coast naphtha loading over end March to early April had been provisionally booked on product tankers for voyages into the Far East, said market sources.
Furthermore, BP was heard seeking to book a Medium Range tanker to lift 38,000 mt of naphtha for a USGC-to-Far East voyage, loading March 29-31, and Valero was heard seeking to book an MR tanker for a similar USGC naphtha cargo, loading April 4, for a trans-Atlantic voyage with options for East discharge, sources said.
As a result, April-loading USGC-Far East fixtures total 136,000 mt, already half of the total amount of March-loading cargoes which amount to around 228,000 mt, showed data from S&P Global Platts cFlow.
US-to-Asia naphtha arbitrage closed
Previously, the US-to-Asia naphtha arbitrage was closed as a polar vortex shut down refineries and berthing operations in USGC in second-half February.
USGC port operations also saw a series of delays due to severe weather over the winter months, and continued to see delays due to fog throughout March, with the most recent fog delay closing the Houston Ship Channel and other USGC ports March 26-27, according to port agents.
The lack of supply from USGC also led naphtha buyers to procure cargoes from Peru, from which two MR-sized cargoes were due to arrive in H1 April, Platts cFlow data showed.
The Asian naphtha market
The Asian naphtha market depends on arbitrage shipments from the West of Suez to fulfil a net shortage of at around 2 million mt per month, so limited supply from both Europe and US had boosted sentiment.
- Naphtha market sentiment has since reacted to progress with the Suez Canal blockage, with a flatter backwardation reflected in Japan naphtha swap spreads.
- Front month April-May Mean of Platts Japan naphtha swap spread had seen its structure fall $2.50/mt day on day to $6.50/mt on March 29, Platts data showed.
- Asian naphtha traders said arbitrage was not open for all grades of US naphtha.
Limited opportunities for the USGC-Asia naphtha arbitrage
On paper, traders have had limited opportunities for the USGC-Asia naphtha arbitrage, as the physical spread between benchmark naphtha C+F Japan and FOB USGC after including MR freight has swung into both negative and positive territory over March thus far.
This cross-regional spread minus MR freight between FOB US Gulf Coast and C+F Japan naphtha was largely in negative territory in March, and averaged minus $1.09/mt over March 1-26, Platts data showed.
Traders also have to consider other costs such as port charges, Panama Canal fees or changes in market structure affecting delivered prices.
Benchmark physical C+F Japan naphtha
Benchmark physical C+F Japan naphtha has since edged down $5.375/mt on the day to $572.375/mt on March 29’s Asian close, due to anticipated resumption of supply flows through the Suez Canal, Platts data showed.
For the USGC to Northeast Asia voyages, the MR tanker freight has begun to rise, and was assessed up 4% month on month at $1.3 million on March 29.
USGC take around 30 days
Typically voyages from the USGC take around 30 days to arrive in North Asia via the Panama Canal while transiting at 13 knots.
However, extended wait times at the Panama Canal due to increased transit demand can delay a tanker voyaging through the Canal southbound, with current wait times standing four-four days depending on the time of booking, according to shipping sources.
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Source : Platts
