India's June naphtha exports slide 43% on month, but rapid rebound seen likely

India's naphtha exports slid 43% month on month in June, but a larger volume being offered via tender in July and a fall in freight costs point to a likely rebound in the near term, market participants said Monday.

The country, a key naphtha exporter in Asia, shipped 521,364 mt in June, down sharply from a near two-year high of 916,605 mt in May, latest government data showed. Exports were last higher at 916,776 mt in July 2017.

Despite the month-on-month slide in June, naphtha exports over January-June totaled 4.35 million mt, up from 4.0 million mt in H1 2018, the data showed.

The average overall capacity utilization rate at refineries in India stood at 99% in June, down from 107.5% a year earlier, due to turnarounds at several plants in the month, S&P Global Platts data showed.

The maintenance in June came on the heels of India's naphtha exports hitting a near two-year high in May amid a surge in volumes shipped by Reliance Industries. Reliance shipped at least 385,000 mt of naphtha in May -- more than half of India's total exports -- from Sikka due to maintenance at its Jamnagar reformer unit.

With the maintenance at refineries now largely completed, traders and shipping industry executives said India's naphtha exports were already on the path to recovery.

Suppliers have already sold at least 384,000 mt of naphtha for August loading -- more than half the total exported in June -- according to data collated by Platts from open tenders issued to date.

State-run Bharat Petroleum Corp Ltd. is offering two Medium Range-sized paraffinic naphtha cargoes for the first and third decades of August on an FOB basis.

Indian refiners were poised to issue more spot tenders in the next few weeks, market sources said.

A recent decline in freight rates has also made naphtha shipments from India to North Asia more lucrative. Platts assessed India-Japan MR tanker freight at w100 Friday, a year-to-date low, and down sharply from the year-to-date high of w162.5 hit in mid-January.

A MR typically carries up to 40,000 mt of cargo and take four weeks to deliver naphtha from Sikka to Japan and then reach Yeosu to open for its next voyage. Freight rates are currently being weighed down by ample supply and weak demand, reducing the delivered cost of naphtha for end-users, market sources said.