Demand for butane from Asian cracker operators weakened this week as prices of naphtha, which is a widely preferred feedstock for petrochemical production, are on a downtrend, as per ICIS. Butane has lost its price advantage for cracker operators at the current US$7-10/ton (€5-8/ton) cheaper price than naphtha, against the acceptable price gap of at least US$50/ton.
Asia imports its butane requirements from the Middle East.
On 10 April, butane prices for H1-May were at US$882-887/ton, meanwhile naphtha price were assessed at US$892-894/ton CFR (cost and freight) Japan. Last week, naphtha prices shed US$47.5/ton, tracking losses in the crude market, while butane prices increased by US$14/ton over the same period. On Wednesday morning, open-spec H2-May naphtha contract were at US$886-889/ton CFR Japan, down US$5-6/ton from Tuesday, according to ICIS.
Demand for butane for cracking purposes gained strong momentum in February to March – when naphtha prices were piling up gains while butane prices were heading downhill – whereas it was almost nil from September 2012 to January 2013. This month, however, buying interest from northeast Asian importers is waning, with some buyers in South Korea suspending butane procurement, market sources said. In Japan, some cracker operators with integrated petrochemical plants can still take butane even if the price gap to naphtha has narrowed to US$30/ton but not lower, an industry source said. “For May delivery, total consumption of butane for crackers [in Japan] is expected to be 50,000. It is getting lower as the price gap between butane and naphtha is getting narrower,” the supplier said. The country’s butane imports for April delivery were estimated at a minimum of 80,000 tons.
“And, basically petrochemical companies want to crack naphtha instead of butane, because [the] current driver for cracking margin is coming from aromatics,” the Japanese supplier said.
Cracking butane can only produce olefins, while cracking naphtha can produce olefins and aromatics products. Some petrochemical producers are considering switching to other feedstock like propane that offer better cost advantage.
12-Apr-13 
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