FocusAsian BTX producers turn to low-cost butane

11 July 2007 08:35  [Source: ICIS news]

By Mahua Mitra and Nurul Darni

 

SINGAPORE (ICIS news)--Several northeast Asian aromatics producers and cracker operators have maintained usage of low-cost butane as alternative feedstock in response to soaring naphtha costs, a trend that is set to persist if naphtha prices remain high, industry sources said on Wednesday.

 

Asia’s open-spec naphtha prices have risen to more than $700/tonne CFR (cost and freight) Japan this week, in part due to benchmark crude futures’ gains which have been hovering at more than $70/bbl, pushed higher on geopolitical concerns in Iran and Nigeria as well as expectations of global supply tightness in the second half of the year.  

 

“Cracker operators and BTX producers are always on a lookout for lower-cost alternative feedstocks, in the face of rising naphtha and in order to keep their plants running,” a naphtha trader from Japan’s Mitsubishi Chemicals said.

 

South Korean aromatics producer LG Petrochemical and Japan-based Maruzen Petrochemical were among those which used some portions of butane feedstock, company sources said.  The switch had resulted in a drop in production volume of benzene, toluene and mixed xylenes (BTX), they added.

 

Maruzen was losing about 2-3% per month of the volume produced at its Chiba plant and LG Petrochemical was losing about 5-10% per month at its Yeosu-based plant, they said. Maruzen started using butane from the end of April and was planning a review in August about continuing to use butane as its feedstock, the source added.

 

Meanwhile, Japan’s third largest olefins producer Idemitsu, 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.

 

Supporting this view, the source with LG said that the company had switched from naphtha cracking to butane earlier this year and planned to use butane as its feedstock until September or October.

 

“If naphtha prices remain at late $600/tonne or $700/tonne, then we could continue using butane,” he said.

 

Increased use of heavy naphtha for gasoline production was likely to create a deficit until 2010 for cracker-based aromatics producers who could switch to alternatives like liquefied petroleum gas (LPG), said a Singapore-based consultant.  

 

Taiwan’s Formosa Chemical and Fibre Corp (FCFC), a key aromatics producer and end-user, had also switched to using gas rather than liquid feedstock, he added. More producers in Asia were expected to follow suit as supply of LPG was expected to be in surplus in the coming years, he added.

 

Earlier ICIS news reported that a deficit of heavy naphtha supply was seen for the Asia-Pacific region and China until 2010 as refiners within Asia could divert volumes for blending due to growing gasoline demand, according to Kok Keng Koh, a consultant with Wood Mackenzie, at a conference in June.

 

 

 

By: Mahua Chakravarty
+65 6780 4359

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