Japan's JXTG Nippon Oil and Energy Corp has switched a portion of its steam cracking feedstock to LPG from naphtha, sources familiar with the matter said Monday.
The price of propane is currently below 90% the price of naphtha, making it a more lucrative feedstock, S&P Global Platts data showed.
The Japanese company is seeking 10,000 mt of LPG each for its two naphtha-fed steam crackers in Kawasaki, sources familiar with the matter said Monday. The cargoes are for delivery in the second half of March but details of the propane/butane split could not be confirmed.
A JXTG Nippon Oil & Energy Corp. spokesman declined comment on the matter Monday.
Most petrochemical producers can switch between 5% to 20% of their steam cracking feedstock to LPG from naphtha when the economics are viable. They typically switch to LPG when it is 90% the price of naphtha, or lower.
On Monday, propane was 88% the price of naphtha on a CFR Japan basis; CFR Japan refrigerated propane has fallen 12.9% in the past month to $530.50/mt Monday from $609/mt on December 27, 2017. Naphtha on a CFR Japan basis dipped 1.7% to $599.88/mt from $610.50/mt over the same period, Platts data showed.
With the price of naphtha falling less than propane, the spread between the two widened. The LPG discount to naphtha widened to $69.38/mt Monday from $1.50/mt on December 27, and hit a nine-month high at $79.50/mt last Friday.
JXTG's buying follows Taiwan's Formosa Petrochemical Corp.'s purchase of an evenly split 44,000 mt LPG cargo for delivery over March 6-15 last Thursday. That cargo was bought at a discount of around $80/mt to the Mean of Platts Japan naphtha assessments on a DES basis.
Moreover, the butane-propane spread slipped deeper into negative territory Monday at minus $18/mt, versus minus $14/mt the previous session, making butane more attractive than propane.
Weak LPG prices have taken a toll on Asian naphtha demand of late. Premiums for physical naphtha cargoes on both a CFR Japan and CFR Korea basis crunched to plus $4/mt Monday from plus $11.50/mt at the start of the month.
JXTG Nippon Oil & Energy Corp. was established in April 2017 as the refining arm of JXTG Holdings after its merger with TonenGeneral.
The company has two steam crackers in Kawasaki, one that can produce 404,000 mt/year of ethylene and 260,000 mt/year of propylene and the other 515,000 mt/year of ethylene and 300,000 mt/year of propylene.
