Rising Prices, Maintenance to Cap Asia’s LPG Cracking in March: OPIS Poll
Flexible crackers in Asia are set to reduce LPG cracking volumes in February and March, as a sustained price rally and a heavy maintenance season in the first quarter continue to keep buying activities at bay, according to the latest monthly OPIS survey.
Flexible crackers capable of processing both naphtha and LPG plan to crack 395,000 metric tons of LPG in February and 401,000 mt of LPG in March, both down moderately from the actual cracked volume at 453,000 mt in January.
The markdown is due mainly to the contraction in propane cracking volumes. February and March cracking volumes planned for propane stand at 244,000 mt and 248,000 mt, respectively, a notable drop from 328,000 mt in January.
Market sources attributed the slowdown in gas cracking to its continued price resilience stemming from a supply crunch, combined with a concentrated maintenance period in Asia that has put several crackers offline.
The CFR Japan propane flat price carried over gains to consolidate at $587/mt on Jan. 30, recording the highest level since June 23 last year, when the price closed at $592/mt, according to OPIS data.
Alongside the paper market strength, which has been fueled by a crude rally amid mounting Middle East tensions, adverse weather conditions in the U.S. have also limited spot availability, pushing up LPG prices in the physical market.
Lingering sea fog and recent cold snaps along the U.S. Gulf Coast have snarled cargo flows since the start of the year, with the resultant price upswing, in turn, dampening regional demand.
The shifting cost advantage from LPG to naphtha has already been reflected in the paper swap spread. The February spread between the Far East propane swap and Japan naphtha swap—of particular interest for flexible crackers to compare feedstock economies—was pegged at a discount of $31.26/mt on Wednesday, well above the -$50/mt breakeven point required to favor LPG cracking over naphtha.
Meanwhile, heavy maintenance in the first quarter has subdued some crackers’ demand for feedstocks in Asia.
In Japan, Keiyo Ethylene began a two-month maintenance on Jan. 22, while Resonac and Asahi Kasei Mitsubishi Chemical are both scheduled for turnarounds in February.
Elsewhere, South Korea’s Lotte Chemical plans to shut down its Yeosu cracker for a turnaround from April to June, OPIS previously reported. The Yeosu cracker has an annual capacity of 1.2 million mt/year of ethylene and 620,000 mt/year of propylene.
Consequently, planned cracking volumes for February have been revised downwards, from earlier estimates of 284,000 mt of propane and 156,500 mt of butane.
The overall scale-back in LPG cracking comes despite a rise in butane cracking volumes, which reached 151,000 mt and 153,000 mt for February and March, respectively, up from the total of 125,000 mt one month before.
Methodology: OPIS, a Dow Jones company, collects Asia-based petrochemical companies’ feedstock consumption plans for the current and next month, as well as actual consumption in the previous month. OPIS contacts feedstock procurement officers for the survey by phone, email or messages in the last week of the previous month or the first week of the current month. OPIS may use proxy data based on the best market information available for minor missing entries due to non-response by a stipulated deadline. Such proxies should not alter the overall trend or deviate from the general behaviors of most participants.
—Reporting by Yiwen Ju, yju@opisnet.com and Cheryl Lee, clee@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com