North Asia Petchem Makers Weigh Butane Switch vs Naphtha
Some North Asian petrochemical makers are considering the use of butane for their crackers in April and May, as prices of the alternative feedstock fall even more than naphtha, industry sources said on Tuesday.
South Korea's Samsung Total, LG Chem and Honam Petrochemical were studying butane prices for the switch, while Japan's Mitsui Chemicals might issue a tender to buy a 10,000t cargo of the liquefied petroleum gas (LPG) soon, sources said.
"It seems like some end users are starting to explore cracking LPG. Demand for naphtha may be reduced slightly," said one of the sources.
The use of alternatives would also help crackers to keep operating at steady rates since margins would be maintained.
North Asian petrochemical producers often look to the spot LPG market for opportunities to improve margins – the last time being October and November – especially when demand further downstream gets squeezed or naphtha becomes relatively more expensive.
Spot LPG prices have fallen by more than 20% since early February to around $390 a tonne on Tuesday, outpacing a 13% fall in naphtha prices during the same period.
Benchmark Saudi Aramco contract prices for March have also fallen by more than 10% from February to $450 a tonne.
Petrochemical firms usually consider switching to LPG when its price falls to 90-95% of naphtha. Current spot LPG prices represent just above 95% of naphtha values.
Butane was even more expensive than naphtha a month ago at $480-$500 a tonne versus around $470 for naphtha.
"Butane prices have fallen but not faster than expected. Some naphtha cracking centres are still hesitating and adopting a wait and see approach," said a trader.
No run cuts
The petrochemical firms might also be looking at butane in case crude oil prices rise, some traders said, making naphtha supplies costlier in the future.
US light crude has risen from the mid-$30s a barrel in mid-February to above $47 on Tuesday, after having fallen from record-highs above $140 last July.
The rise in LPG demand may add to a fall in naphtha's value, already diluted in recent weeks on expectation of weaker downstream demand and higher naphtha exports from India.
Differentials for spot April naphtha cargoes have fallen below $5 premiums to Japan spot quotes, cost-and-freight (C&F) basis, down from premiums above $10.00 fetched two weeks ago.
Regional downstream demand, especially from China, is still relatively healthy even though it is expected to fade in coming months as the economic downturn bites, traders said.
"The Chinese polymer market is still good, but nobody knows how long it will last," said a trader.
Plastics demand slumped late last year due to the global downturn, turning naphtha cracks against Brent crude to deep discounts in the mid-$100s a tonne and forcing some plants to cut operation rates to as low as 70%.
With cracks recovering to around $70 a tonne since, industry sources said the petrochemical makers are not considering run cuts even with downstream demand seen waning.
South Korea's petrochemical firms are still operating at nearly full tilt last week.
By Chua Baizhen and Osamu Tsukimori, Reuters.
Quoted from: Chemicals-Technology.com
South Korea's Samsung Total, LG Chem and Honam Petrochemical were studying butane prices for the switch, while Japan's Mitsui Chemicals might issue a tender to buy a 10,000t cargo of the liquefied petroleum gas (LPG) soon, sources said.
"It seems like some end users are starting to explore cracking LPG. Demand for naphtha may be reduced slightly," said one of the sources.
The use of alternatives would also help crackers to keep operating at steady rates since margins would be maintained.
North Asian petrochemical producers often look to the spot LPG market for opportunities to improve margins – the last time being October and November – especially when demand further downstream gets squeezed or naphtha becomes relatively more expensive.
Spot LPG prices have fallen by more than 20% since early February to around $390 a tonne on Tuesday, outpacing a 13% fall in naphtha prices during the same period.
Benchmark Saudi Aramco contract prices for March have also fallen by more than 10% from February to $450 a tonne.
Petrochemical firms usually consider switching to LPG when its price falls to 90-95% of naphtha. Current spot LPG prices represent just above 95% of naphtha values.
Butane was even more expensive than naphtha a month ago at $480-$500 a tonne versus around $470 for naphtha.
"Butane prices have fallen but not faster than expected. Some naphtha cracking centres are still hesitating and adopting a wait and see approach," said a trader.
No run cuts
The petrochemical firms might also be looking at butane in case crude oil prices rise, some traders said, making naphtha supplies costlier in the future.
US light crude has risen from the mid-$30s a barrel in mid-February to above $47 on Tuesday, after having fallen from record-highs above $140 last July.
The rise in LPG demand may add to a fall in naphtha's value, already diluted in recent weeks on expectation of weaker downstream demand and higher naphtha exports from India.
Differentials for spot April naphtha cargoes have fallen below $5 premiums to Japan spot quotes, cost-and-freight (C&F) basis, down from premiums above $10.00 fetched two weeks ago.
Regional downstream demand, especially from China, is still relatively healthy even though it is expected to fade in coming months as the economic downturn bites, traders said.
"The Chinese polymer market is still good, but nobody knows how long it will last," said a trader.
Plastics demand slumped late last year due to the global downturn, turning naphtha cracks against Brent crude to deep discounts in the mid-$100s a tonne and forcing some plants to cut operation rates to as low as 70%.
With cracks recovering to around $70 a tonne since, industry sources said the petrochemical makers are not considering run cuts even with downstream demand seen waning.
South Korea's petrochemical firms are still operating at nearly full tilt last week.
By Chua Baizhen and Osamu Tsukimori, Reuters.
Quoted from: Chemicals-Technology.com
