As a result of China’s mandatory limits on power use, the Asia propylene-naphtha spread hit a near six-week high on Oct. 12, while benchmark C+F Japan naphtha saw volatility in crude markers as prices fell day by day.
This week, the difference between FOB Korea propylene and C+F Japan naphtha cargo increased by 44% to $332.75/mt at the Asian close on October 12, according to Platts’ data.
In the week ending September 2, the spread was $337/mt, according to data from S&P Global Platts.
Breakeven is typically $250/mt, so this is a bit more.
Propylene prices in China rose over the weekend as purchasers increased their stockpile in anticipation of a supply constraint as a result of the country’s required dual control over power use and production.
The spot market benefited from firmer crude oil and other propylene-making feedstocks..
Between Oct. 7 and Oct. 12, the East China propylene price climbed by Yuan 1,100/mt to Yuan 9,000/mt ex-tank price, while the Shandong propylene price jumped by Yuan 1,600/mt to Yuan 9,700/mt.
Propylene manufacturers have little room to boost their run rates after National Day vacations since the country still lacks coal and other energy supplies, according to Chinese industry sources, Platts reported previously.
Propylene manufacturing facilities in several Chinese provinces are working at lower rates due to power outages and the consequent scarcity of propylene, according to a China-based trader. “Downstream polypropylene demand is supported by strong PP futures,” the trader added.
According to Platts data, FOB Korea propylene climbed $130/mt week over week to $1,105/mt on Oct. 12.
Moreover, the olefin manufacturers’ ethylene production margin was thin; at the Asian close on October 12, it was $387.75/mt, down from the previous week’s $3.375/mt and the previous month’s $18.625/mt.
For non-integrated producers, this price remained over the breakeven point of $350/mt, according to market sources, and this will likely support the high cracker run rates.
Standard C+F Japan naphtha fell $1.125/mt on a daily basis, but up $28.375/mt weekly on a weekly basis to $772.25/mt at the Asian close on October 12, according to Platts data.
CFR Japan naphtha physical crack against front-month ICE Brent oil futures narrowed by $0.975/mt day on day, but climbed by $12.025/mt week on week to $142.475/mt on October 12 at the Asian close, Platts data showed. The mixed picture was also reflected.
Napptha cracker demand also remained flat as LPG prices dropped throughout the day.
This reduced the propane-naphtha spread to $99.75/mt at the Asian close on October 12 by $10.375/mt on the day and $54.875/mt for the week, according to Platts data.
When LPG’s price is 90% or less of naphtha’s, it can be used as a steam cracking feedstock.