The spot market for LPG cargoes loading out of the Middle East has softened amid weak demand from Asian buyers, according to market sources.
This was reflected in the spot cargo price differentials, with Arcadia heard selling 44,000 mt of refrigerated LPG in a 3:1 propane-butane mix to Shell at a $2/mt discount to the Saudi Aramco April contract prices for propane and butane. The cargo is for loading over April 5-6 out of Yanbu.
The most recent trade for a cargo loading out of the Persian Gulf was done at a premium of around $2/mt to the April CP, traders said. Bayegan was heard to have sold 44,000 mt of refrigerated LPG in a 3:1 propane-butane ratio for early April loading out of Ras Laffan to Vitol.
"I think it will be very difficult to sell a propane-heavy parcel this time of the year, now that we're out of the winter season," a Japan-based trader said.
"Traders will snap [propane cargoes] up if the price is low enough, but I doubt they'll find much downstream demand," a second trader said.
"So it's no surprise that price differentials have flipped to discounts now," he added.
The peak heating demand season in Japan typically lasts from November to February.
Traders also noted that LPG demand from the petrochemical sector was starting to taper off, with naphtha-fed steam crackers in North Asia recently cutting run rates amid underwhelming olefins margins.
"The ethylene-naphtha spread in early April is hovering around $5-10/mt at best," a South Korean petrochemical producer said Friday.
Petrochemical producers can opt to use 10-40% of LPG in their feedstock pools -- depending on refinery configurations and economics -- in varying proportions of propane and butane.
South Korea's Yeochun Naphtha Cracking Center was the most recent producer to do so, reducing run rates at its Yeosu-based No. 1 and No. 2 naphtha-fed steam crackers to 90% earlier this week.
The No. 1 steam cracker can produce 860,000 mt/year of ethylene and 450,000 mt/year of propylene, while the No. 2 cracker can output 580,000 mt/year ethylene and 280,000 mt/year of propylene.
Its No. 1 and No. 2 steam crackers were utilizing up to 10% LPG in their feedstock pools since early March, Platts reported previously.
In addition, several petrochemical plants in South Korea -- the region's single largest buyer of petrochemical feedstock -- are slated to undergo turnarounds from March to September this year.
"All the main players -- Hyundai OilBank, S-Oil, SK Innovation, LG Chem -- will have run rate cuts, turnarounds, or unplanned shutdowns during this period," a trader said.
