Taiwan's Formosa Petrochemical Corp is extending the use of propane as a petrochemical feedstock into June due to costlier naphtha, prompting it to issue its eight LPG import tenders in a row since H2-February, as per market sources in Platts. Formosa will use 150,000 mt per month of LPG, at any ratio of propane and butane, when the naphtha/LPG spread is wide enough. Propane is now 86% the price of naphtha, while butane is almost 90% of naphtha value, keeping LPG's attractiveness as an alternative feedstock.
In its latest tender, the privately run refiner and petrochemical maker is seeking up to 22,000 mt of propane and/or the same amount of butane for delivery over June 1-10, ex-ship Mailiao. The tender closes April 24, with same-day validity. So far, Formosa had already bought via tenders 66,000 mt of propane for May delivery, 55,000 mt propane and 11,000 mt butane for April delivery and 11,000 mt propane as well as 11,000 mt of butane for second-half March delivery, trade sources said. The deep discounts to Mean of Platts Japan naphtha swap at which Formosa bought its cargoes, reflective of the current bearish market, has also encouraged the company to buy regularly, traders said.
The discount has stayed wide even though naphtha prices have been under downward pressure from the arrival of arbitrage cargoes and slowing end-user demand ahead of the regional petrochemical plant maintenance season, sending it to nine-month lows recently. But LPG is under greater pressure due to slow North Asian demand during summer, especially with Japan keeping stocks low, ample supplies from the Middle East as well as the emergence of more US cargoes along with lower crude, sending prices to their lowest in nine and a half months. Formosa has been using LPG as an alternative petrochemical feedstock to naphtha since mid-February. When LPG is not deemed an attractive option to naphtha, Formosa may not even use any LPG as a feedstock, the source added.
25-Apr-13 
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