* Cheaper LPG curbing demand for naphtha
* LPG can be used as alternative petrochemical feedstock
* At least 300,000 T of LPG seen replacing naphtha in May
(Adds price chart; comments from LG Chem)
By Seng Li Peng and Jane Chung
SINGAPORE, April 10 Asian petrochemical makers
are ramping up purchases of liquefied petroleum gas (LPG) to use
as an alternative feedstock to naphtha, looking to snap up cheap
cargoes as heating demand for LPG fades in the wake of winter.
LPG, often referred to as butane or propane, is commonly
used in heaters or stoves in some countries, but can also be an
ingredient in plastics used to churn out everything from drinks
bottles to carrier bags.
Faltering demand for naphtha could drag on prices that have
been in premiums to benchmark Japanese quotes for most of the
year compared to discounts in the same period in 2016, while
offering support to LPG markets.
Four traders said that Taiwan's Formosa Petrochemical Corp
, Asia's top naphtha importer, last week bought its
first spot LPG cargo of the year, with South Korea's LG Chem
and Lotte Chemical also taking cargoes.
"Typically LPG prices fall in summer as heating demand
weakens, and we increase our LPG purchase when prices are low,"
said LG Chem's spokesman, but he did not confirm any purchases.
Formosa's spokesman was unavailable for comments while Lotte
Chemical has declined to comment.
"The Koreans and Formosa moved immediately when the value
was in switch mode, (showing) impressive quickness," said one of
the traders, who closely follows naphtha and LPG markets. He
asked not to be identified as he was not authorised to speak
Petrochemical companies in Asia are typically set up to
shift around 5 percent to 15 percent of their feedstock to LPG
when prices drop below 93 percent of the cost of naphtha.
Late last week, Asian spot propane price for cargoes to be
delivered in the second half of May were less than 86 percent of
naphtha's $493.50 a tonne.
The traders estimate that some 300,000 tonnes of LPG is
expected to replace naphtha in May, or around 7 percent of North
Asia's naphtha demand. They said that could climb to 400,000 to
450,000 tonnes in subsequent months.
"LPG prices will likely be weak relative to naphtha in the
coming months, incentivizing petrochemical demand," said He
Yanyu who leads Asia natural gas liquids market research at IHS
However, increased LPG purchases would likely mitigate the
impact on naphtha markets from possible naphtha shipment delays
from Qatar following a splitter outage.
And Asia is structurally short of naphtha, with a supply
deficit averaging 4 million tonnes a month in 2016, data from
IHS consulting firm showed.
(Reporting by Seng Li Peng and Jane Chung in SEOUL; Editing by
Joseph Radford and Christian Schmollinger)