08 April 2011 14:23 [Source: ICIS news]
LONDON (ICIS)--The European cracker feedstock slate is shifting in favour of naphtha from lighter feedstocks such as liquefied petroleum gas (LPG), reducing supply constraints on propylene (C3) and butadiene (BD) output, market sources said on Friday.
“Cracker feedstock has changed a bit. LPG [is] not as favoured,” a major European cracker operator said.
“Some LPG is in the mix, but not full like it was last month,” they added.
ICIS cracker margin data analysis showed that in the week ending 1 April, LPG contract margins of €399/tonne were showing just a €14/tonne ($20/tonne) advantage when compared with the contract naphtha margin of €385/tonne.
LPG feed had started to become more attractive towards the end of February and those cracker operators with the flexibility to do so had run more or less fully on LPG throughout March. Alongside planned and unplanned production issues, this had helped tighten C3 and C4 supplies in Europe.
The extreme strength of C4 market – with butadiene prices having rocketed over the past couple of weeks due to strong demand from the US – is also thought to be proving a good incentive for cracker operators to shift the feedstock slate a little more towards naphtha.
Meanwhile the effects of the shift away from LPG – albeit partially – are already being seen in the propylene market, with players reporting a more finely balanced market situation than had been envisaged. The cracker turnaround season is in full swing and a number of reductions at refineries relating to the E10 gasoline mandate are still ongoing, according to sources.
However in terms of pricing, high upstream crude and naphtha levels will put a floor on propylene spot values, with sellers unlikely to offer any volumes below the April contract price of €1,210/tonne FD (free delivered) NWE (northwest Europe).
Similarly, improved crude C4 output is not expected to put any downward pressure on crude C4 or butadiene spot prices, as US demand is so strong and prices on a global basis are very high.
Rather, as one source said, “those [producers] that can, will try and squeeze even more out” to take advantage of the high prices.
($1 = €0.70)
For more on ethylene, propylene and butadiene visit ICIS chemical intelligence
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