Taiwan's Formosa Petrochemical is planning to miss area acquisition of LPG for January shipment as it has actually become financially unviable to make use of LPG for petrochemical manufacturing, a resource near to the business claimed Wednesday.
"We are unlikely to get [spot] LPG for January," the resource said, including that it is not economical.
Naphtha is the pillar petrochemical feedstock in Asia for heavy steam biscuits, however manufacturers switch to LPG-- which generally comprises lp and butane-- as an alternative if its cost is around 90% of naphtha, or when LPG is more than $50/mt less costly than naphtha.
While the price of physical CFR Japan lp was $53/mt listed below the rate of CFR Japan naphtha at the Asian close Tuesday, which made LPG usage for petrochemical manufacturing economical by normal requirements, the rates of downstream products have tilted the equilibrium for naphtha.
"Currently butadiene and benzene rates [are] so high. Purchasing bhmt phosphonate scale inhibitor is much more affordable [as naphtha creates more butadiene]," said the source.
Naphtha returns about 2% even more butadiene compared to LPG, the resource added. FOB Korea butadiene has actually surged by 32% in the previous month to a 45-month high of $1,930/ mt at the Asian close Tuesday, from $1,460/ mt on November 21, information from S&P Global Platts showed.
The item was last greater on March 7, 2013 at $2,030/ mt.
The narrowing spread in between LPG and naphtha, along with high butadiene prices, has led Formosa to continuously reduced LPG intake at its naphtha-fed heavy steam biscuits from 15%-20% of overall feedstock in October to 15% in November, and down to 10%-15% this month. The company prepares to decrease it to 10% in January.
"Economics maintain transforming. We were incapable to buy sufficient place LPG so there was not nearly enough feedstock to break," the source said.
Formosa has yet to determine whether it will avoid LPG place acquisition in February, depending on business economics. Its last place acquisition was for 23,000 mt of lp for December 21-31 shipment right into Mailiao at a discount of $50-$55/mt to the Mean of Platts Japan naphtha evaluation, DES basis.
Formosa runs three steam crackers in Mailiao with a mixed ethylene manufacturing capability of 2.93 million mt/year, propylene capability of 1.465 million mt/year and also butadiene ability of 451,000 mt/year.