SINGAPORE (ICIS)--China International United Petroleum & Chemicals Co (Unipec) has proposed to sell propane sourced from US-based Phillips 66 to Chinese propane dehydrogenation (PDH) companies, a source from its parent firm Sinopec said on Thursday.
Unipec last week signed a five-year term contract with Phillips 66 for the supply of propane. The Sinopec source said that the contract would commence in the second half of 2016, with one cargo of approximately 44,000 tonnes delivered every month.
Shanghai-based China Jinshan Associated Trading Corp, also a Sinopec subsidiary, is responsible for the distribution of the US-sourced propane in Chinese markets, the source told ICIS .
“We are now finding buyers of US propane and hope to co-operate with PDH companies,” a source from China Jinshan Associated Trading said.
China Jinshan Associated Trading is expected to first negotiate with Haiwei Chemical and Fujian Meide Petrochemical, as both producers have larger requirements for the material, according to market sources.
Haiwei Chemical has yet to sign any term contracts for propane, though it is expected to start production at its a 500,000 tonne/year PDH plant in north China’s Hebei province at the end of 2015.
Fujian Meide Petrochemical is expected to start up a 660,000 tonne/year PDH plant in south China’s Fujian province, but has only signed a contract with US-based Targa Resources Partners for the monthly delivery of half a cargo from 2016.
However, Unipec faces challenges in the propane market as PDH companies prefer to sign term contracts directly with overseas suppliers, market sources said.
“Unipec’s chances lie in spot markets,” the sources said, adding that PDH companies would need to purchase spot propane cargoes to supplement their contract supply.
Unipec also has an advantage over its competitors. Its parent Sinopec has reached an agreement with a shipping company to build vessels to deliver propane from the US, the Sinopec source said.
The number of the carriers and their delivery dates are unknown, according to the source.“But all in all, price [for propane] would be the determinant factor,” one market source said.