FocusAsia petchems switch to butane

10 July 2007 05:39  [Source: ICIS news]

By Nurul Darni

SINGAPORE (ICIS news)--Asian petrochemical producers are switching to butane to meet some of their feedstock needs as naphtha gets pricier, traders and end users said on Tuesday.

“Having an access to low-cost feedstocks, such as butane, will give some Asian petrochemical companies considerable advantage over others which are dependant on expensive oil-based feedstocks such as naphtha,” Jim Weinrauch, a consultant with Naphtha Information Services, said.

Rising feedstock costs has already driven several petrochemical companies in Japan and South Korea to using butane, as the spread between naphtha and butane widens.

Open spec naphtha prices in Asia currently were at least $90-100/tonne higher than butane prices. A workable spread typically for feedstock switch would be around $40-50/tonne, traders said.

“Purely from an economics point of view, butane has more price advantage over naphtha and this will discourage some companies from relying too heavily on naphtha as (naphtha) prices have also been rising steadily,” a trader with South Korea’s LG Petrochemical said.

The company had started using around 15% of its feedstock portion to butane from May, he added.

Asia’s open-spec naphtha prices had risen to over $700/tonne CFR (cost and freight) Japan this week, in part due to crude futures’ gains which have been hovering at more than $70/bbl.

Apart from LG Petrochemical, other South Korean companies such as LG Chemical, Honam Petrochemical and Samsung Total have alsoused some percentage of butane as its cracker feedstock.

Normal butane or N-butane also is highly valued as a petrochemical feedstock as it yields more ethylene in a steam cracker.

In Japan, companies such as Idemitsu Kosan, Mitsui Chemical, Showa Denko, Mitsubishi Chemical and Maruzen Petrochemical have each used some portions of butane feedstock at their crackers for some months now, traders said.

Idemitsu, Japan’s third largest olefins producer, said it had steadily increased its usage of butane feedstock this year, amid rising naphtha costs.

“We’ve raised our butane feedstock to slightly over 10% this year, from 5-7% last year. I think this trend will continue with other Japanese petrochemical companies as well this year, if naphtha prices continue to inch up,” a trading manager at Idemitsu said.

Despite an increasing appetite towards non-naphtha feedstocks this year, it would not displace naphtha as the predominant feedstock in Asia, traders said. 

“These non-naphtha feed portions are still relatively small. It would not change naphtha’s supply-demand balance in a huge way,” a trader at South Korean oil major, SK Corp said.

Naphtha still accounts for 90-95% of Asia’s cracker feedstock, according to consultancy Poten & Partners.

By: Nurul Darni
65 6789 4359

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