02 October 2013 16:38 [Source: ICIS news]
LONDON (ICIS)--European naphtha demand from the downstream petrochemical sector continues to suffer as alternative feedstock propane remains popular among consumers on the back of a widening price gap, naphtha sources said on Wednesday.
The price spread between naphtha and propane has widened to $137/tonne (€101/tonne) for spot cargoes, from $122/tonne last week.
A naphtha trader said: "There is a lot of propane, that's the issue. The maximum they can change [between propane and naphtha] is 25%. Propane large cargoes are at $740/tonne CIF NWE and you are comparing that to $877/tonne CIF NWE naphtha. That is capping naphtha demand."
A widening spread usually lends support to liquefied petroleum gas (LPG), which tends to be cheaper.
Meanwhile, producers are profiting from the use of propane in the place of naphtha, ICIS data shows. Average third-quarter margins for LPG showed a €64/tonne premium over naphtha margins, according to ICIS analysis.
A number of European crackers are able to switch between naphtha and LPG.
($1 = €0.74)
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