Operators of naphtha fed crackers in Asia mull feedstock substitution by LPG

11-Apr-12
Asian petrochemical producers are mulling a feedstock switch from naphtha to LPG as naphtha prices hover at a near 10-month high and LPG prices fall, as per Platts. Naphtha is the main feedstock for cracker operators in North and Southeast Asia, but switching to LPG -- propane and butane, as a cracking alternative becomes viable when it is priced 90% or less than naphtha, or when LPG is around US$50/mt cheaper than naphtha. Depending on individual refinery configurations, petrochemical producers can swing usage of LPG to comprise 10-40% of total feedstock, in varying proportions of propane and butane. South Korean cracker operators were currently considering a switch to LPG, while Taiwan's Formosa was in the market Monday seeking LPG for H1 May delivery. A Japanese cracker operator is reported to have bought a butane parcel of less than 25,000 mt for H2 May delivery last week CFR Japan propane and butane prices for delivery over H1-June were assessed at US$956/mt and US$1001/mt, respectively, at the Asian close Monday, while naphtha was assessed at US$1053.75/mt CFR Japan for the same laycan, Platts data showed. This makes the naphtha-propane price spread US$97.75/mt and the naphtha-butane spread US$52.75/mt, making it more economical to crack LPG. Naphtha cargoes have been commanding high premiums since late January due to a combination of crimped supply from the West and firm demand in North Asia. Naphtha found further support as LPG prices soared early in the year, pushing butane out of the feedstock pool as an alternative cracking feed, and forcing North Asian end-users to rely solely on naphtha. Platts assessed the CFR Japan naphtha benchmark at a 10-month high of US$1088.13/mt March 15, and prices have remained firm since, with Monday's US$1053.75/mt CFR Japan assessment down US$34.38/mt from that date. LPG prices have been falling steadily since late February as demand for heating fuel waned after the northern hemisphere winter. Prices hit a year-to-date high February 28 when Platts assessed propane at US$1305/mt CFR Japan before falling by US$335/mt to US$970/mt CFR Japan Monday for H1 May.
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Large capacity chemical storage tanks

Large capacity chemical storage tanks