As naphtha prices touch record highs, petrochemical producers in South Korea are considering switching to butane as an alternative feedstock. The key open-spec naphtha contract for H2-December quoted at US$822.50/ton this week, while butane is being quoted at around US$755/ton. Asian petrochemical producers usually start to switch to butane when its prices reach 90-95% of naphtha values. In line with strong crude oil gains, naphtha prices have soared by over hundred dollars a ton from October. Many petrochemical firms in Asia can use about 10% butane, and some as much as 30%, instead of naphtha.
South Korean petrochemical firms buy butane from local distributors, rather than making their own imports, due to difficulty in securing storage facilities. Honam Petrochemical has had the largest consumption of butane, while butane use at LG Chem, the country's biggest chemical firm, also rose to 7% year, compared with 4% a year ago.
However, due to tight supplies, butane prices are estimated to rise to US$850/ton, up from the current price of US$755/ton. Butane prices were at around US$470/ton year ago, and US$655/ton last month.