LPG replaces Naphtha as a feedstock in Asian crackers
- 05-Apr-2022 12:34 PM
- Journalist: Henry Locke
Demand for Naphtha was quite dull in the Asian markets in the first quarter of 2022, and this is primarily because of the downstream Asian crackers switching the feedstock to propane due to high discounts on Russian LPG. The discount was pressured by the ample supply of LPG and shallow competitive market owing to the ban on Russian gas imports by several European countries as a way of showing their condemnation against Russia for the ongoing Russia-Ukraine war. Japanese and South Korean crackers switched to propane in February 2022 as the discount on LPG peaked.
Naphtha demand in the Asian market started decreasing not only because of its current replacement as feedstock in crackers, but its downstream olefins market has been unprofitable dampening the naphtha demand in Asia. The demand for Naphtha was not changed drastically by any means since Naphtha was a staple feedstock for all crackers for a significant amount of time because the prices of LPG were higher than that of Naphtha in the recent years. Even the crackers that switched to LPG sometimes see a meager difference in the prices between these two feedstocks, like $20 - $30/MT. But few Taiwanese and South Korean crackers sense and state that the 'discount could sharpen further,' so the feedstocks switch is still widely found in Asian crackers.
As per ChemAnalyst, if the LPG discount continues, it may replace Naphtha and make a strong position as an alternate feedstock in the Asian crackers and may likely cause a slight downward trend in Naphtha prices in Asia. But in March 2022, the demand for LPG in two of the biggest markets in Asia (India and China) started rising, leading to a rise in the LPG prices in Asia. When the LPG prices rises more than that of Naphtha like the previous year, it may lead to a demand rise for naphtha in the Asian market.