LONDON (ICIS)--European petrochemical demand for naphtha has fallen after support lent by a propane price hike last week diminished with a fall in value of the alternative feedstock this week, industry sources said on Thursday.
A naphtha trader said: "[It is] not so bullish for propane."
On Friday 24 January, alternative petrochemical feedstock propane was trading on average at a discount of around $40/tonne CIF (cost insurance freight) NWE (northwest Europe) to naphtha, boosting buying interest for naphtha in the petrochemical industry.
However, the discount widened to $70/tonne on Thursday 30 January, prompting a weakening in demand for naphtha from the petrochemical sector and placing propane back in the game as the feedstock of choice.
In general, steam crackers in Europe are set up to switch only 25% of their production to LPG.
Nevertheless, there is a huge variation as newer crackers often have more flexibility in switching between the feedstocks, while older crackers are often unable to crack the less-expensive propane.
Adding to the bearish sentiment, overall petrochemical demand for both naphtha and propane is widely expected to fall in February, after the rush to restock in January.
A second naphtha trader said: "Chems seem reluctant to commit so far. I think runs [cracker run rates] will go down a bit."
On average, European crackers were estimated to be running at around 85% of capacity last week.
Europe is structurally long on naphtha, and with exports to the US gasoline and Asian petrochemical sectors remaining on the backburner, the sector is even more reliant on domestic petrochemical demand.