Home > Chemical News

Chemical News

Stronger propane, butane threaten to push LPG from petrochemical feedstock slate: sources

http://www.chemnet.com   Sep 12,2018 S&P Global Platts
London — Strengthening propane and butane prices in recent weeks have begun to threaten LPG's attractiveness as an alternative to naphtha for petrochemical cracking, according to market sources.

Both propane and butane in Northwest Europe are sitting at levels seen during last winter, when LPG's attractiveness as a feedstock is typically at its lowest due to stronger seasonal demand for the products.
On Monday, the physical propane-naphtha spread was assessed at $49.50/mt, nearly level with Friday, when propane hit its narrowest discount to naphtha since January 3. That is the equivalent of roughly 92.6% relative to naphtha.

Meanwhile, CIF coasters were assessed at the equivalent of about 94% relative to naphtha, while large CIF cargoes in NWE were assessed at about 94.5%.

Those gains have been due to tightness on the large propane cargo market at the tail end of September, which has boosted premiums against the paper market, while the butane complex has gained on the back of robust demand for the product as a blending component for winter-grade gasoline.

"There is a complete lack of fresh buying from [petchems], which I think you can understand at these levels," said a source on the propane market. "We are seeing it pricing out of the feedstock slate."

With propane and butane levels relatively close together, there is little incentive to switch between the two, said the source, with naphtha instead poised to pick up the extra demand.

A less competitive feedstock arena may be just the encouragement the naphtha market needs as 10% of European cracker capacity scheduled to be shut for maintenance in September-October is expected to reduce throughput in the region.

Sources in the naphtha market have already noted that uncovered end-user shorts at the end of September are stoking demand in the region, with the reduced competitiveness of gaseous feedstocks likely to increase naphtha's share of the petrochemical feedslate.

Meanwhile, lingering demand from petchem buyers has still been seen on the CIF coaster market, setting a floor for the price, according to a source, but blenders are willing to hit higher levels. That has been particularly strong on the inland barge market, which blenders often prefer, with levels rising towards parity with naphtha, according to an inland market source.
 Print  |    add to Favorites  |    Close