FocusAsian naphtha cracker operators mull cracking cheaper LPG

06 April 2012 09:06  [Source: ICIS news]

By Quintella Koh

SINGAPORE (ICIS)--Asian naphtha cracker operators are mulling the possibility of cracking liquefied petroleum gas (LPG) in place of naphtha, as cracking LPG could be more economical given its current low prices, several operators said on Friday.

Asian cracker operators will typically crack LPG in place of naphtha when the price of one tonne of propane or one tonne of butane is priced at 90% of the price of one tonne of naphtha, the cracker operators said.

In South Korea, Japan and Taiwan, cracker operators use up to 5-15% of LPG in place of naphtha. In southeast Asia, cracker operators can use more than 20% of LPG in place of naphtha.

At least three Asian cracker operators are mulling such a move, several traders said.

LPG demand typically takes a plunge during the summer season as requirements for heating fuel will drop globally, the traders said.

The implication of cracking LPG in place of naphtha means that cracker operators will see less aromatics yield and they will instead see a higher olefins yield.

On an average, cracker operators could see their aromatics yield drop between 5-10%, depending on the mix of LPG and naphtha cargo that they use.

Cracker operators can typically use a combination of LPG and light naphtha, LPG and full-range naphtha, LPG and open-spec naphtha or LPG and pure heavy naphtha, the cracker operators and traders said.

The combination of cracking LPG and light naphtha will substantially cause a cracker’s aromatics yield to fall, while the combination of cracking LPG and pure heavy naphtha will have almost no impact of a cracker’s aromatics yield, the cracker operators said.

The April contract price of propane has been settled at $990/tonne (€762/tonne) FOB (free on board) Ras Tanura, a plunge of $240/tonne from the March contract price of propane.

The April contract price of butane has been settled at $995/tonne FOB Ras Tanura, a decline of $185/tonne from the March contract price of butane.

The CFR Japan naphtha assessment on Thursday was at $1,067.50/tonne.

This implies that the price of LPG is nearing the switching point for cracker operators in Asia, the cracker operators said.

Looking forward into May and June, Asian naphtha prices could see a gradual increase, the cracker operators and traders said.

This is because a dearth of deep-sea naphtha cargoes travelling from the West to the East.

To-date, there are only 110,000 tonnes of deep-sea naphtha cargoes scheduled to arrive in May, the cracker operators and traders said.

This is a far cry from March and April, as both months saw almost 1m tonnes of deep-sea naphtha cargoes being shipped from the West to the East.

“We can expect to see cracker operators announcing their cracking strategy over the next few weeks. Many cracker operators are still in the planning stages,” said a trader.

In China, Sinopec SABIC Tianjin Petrochemical 200,000 tonnes/year cracker in Tianjin can switch between using naphtha and LPG, ICIS data shows.

In Japan, Showa Denko and Sumitomo Chemical operate crackers that can switch between using naphtha and LPG, ICIS data shows.

Showa Denko’s cracker located in Oita has a nameplate capacity of 690,000 tonnes/year, while Sumitomo Chemical’s cracker located in Chiba has a nameplate capacity of 415,000 tonnes/year.

In South Korea, Honam Petrochemical and Samsung Total can switch between using naphtha and LPG, ICIS data shows.

Honam Petrochemical operates a 1m tonne/year cracker in Yeosu and a 1.07m tonne/year cracker in Daesan. Samsung Total operates a 1m tonne/year cracker in Daesan.

In Taiwan, Formosa Petrochemical crackers in Mailiao can switch between using naphtha and LPG, the traders said. Formosa Petrochemical operates three crackers in Mailiao.

The No 3 cracker has a nameplate capacity of 1.2m tonne/year, the No 2 cracker has a nameplate capacity of 1.03m tonne/year and the No 1 cracker has a nameplate capacity of 700,000 tonne/year

In Malaysia, Titan Chemicals crackers can switch between using naphtha and LPG, the traders said. Titan Chemicals operates a 285,000 tonne/year No 1 cracker and a 435,000 tonne/year No 2 cracker at Pasir Gudang in Malaysia.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Quintella Koh
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