End-user naphtha demand has slipped back slightly in recent days leading to a drop in cash premiums in the market, traders said this week.
On Thursday, CIF NWE naphtha cargoes were assessed at $915.25/mt, or a cash premium of $2.50/mt over the November CIF NWE naphtha cargo outright swap.
Cash premiums in the European naphtha market have fallen $6.50/mt from November 1, when they were assessed at $9/mt above the balance-month swap, Platts data shows.
"The downstream demand for polyethylene and polypropylene isn't great," a trader said. "With the whole macro-economic situation, we're seeing slowing...decreasing demand for polyolefins. But that in itself is making other products tight, particularly aromatics."
Naphtha, along with propane, is used as a feedstock in petrochemical crackers.
Cracker operators said that they had reduced operating rates in November to 80% from 85% in October, as ethylene and propylene derivatives relaxed off-take.
"Tanks are full of ethylene. The product is long and there are containment issues," an ethylene consumer said.
Ethylene spot prices were assessed at Eur1,155-1,160/mt ($1,470-1,476/mt) FD NWE Thursday, down Eur25/mt on the week.
A polyethylene producer or another ethylene buyer said the entire chain of polyethylene was destocking. "There is a move to deplete stocks of both PE pallets and films," he said.
The plastic converters said that while demand from agricultural and retail markets was fairly stable, construction and automotives had been harder hit.
"Lubricants and car care products where early winter is traditionally the peak season, we are still seeing weak demand," a plastic bottle manufacturer said.
However, traders also said that while demand for naphtha has dropped slightly, the continuing high cost of propane will add support to the European naphtha market for the foreseeable future.
"Propane is still expensive," a naphtha trader said. "It's hard to work propane in to the cracking pool."
