Petrochemical demand for Europe naphtha remains limited on cheap LPG

08 March 2013 16:40  [Source: ICIS news]

LONDON (ICIS)--Petrochemical requirements for European naphtha remain lacklustre as a result of ongoing cheap prices for rival feedstock propane, sources said on Friday.

“Demand for naphtha is poor, propane is $180/tonne below naphtha for April,” a naphtha trader said.

“In April, yes, it’s [the propane-naphtha spread] -$180/tonne,” a naphtha producer said. “But there are no physical barrels in the front, so I think we could see it price itself out of the chem pool for some barrels, just to balance. That is my guess only, though.”

This price structure is extremely unusual, as propane prices are normally driven above naphtha values in the winter as a result of strong demand for heating fuel.

This year, increased liquefied petroleum gas (LPG) production in Asia and imports from the US, combined with lower demand, have resulted in a long European propane market and low prices.

Now, even with the prompt propane market described as tight, prices are said to be more reflective of the long paper market and values have stayed low. 

Futhermore, the last few weeks have seen tight conditions in the naphtha market support prices, maintaining a wide spread between the two feedstocks.

When asked to describe petrochemical demand for naphtha, the producer said: “They [petrochemical buyers] don’t want to pay up in a tight market, so keep on living hand to mouth.”

Furthermore, petrochemical demand for feestocks is already limited to some extent.

“There’s maintenance going on,” the trader added. “Several crackers are down.”

By: Jo Pitches
+44 208 652 3214

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