European crude C4 and butadiene supply was expected to tighten from January as crackers begin switching back to cracking propane, sources said Wednesday.
NWE propane prices have fallen this week, with the discount paid for the gas hitting $62/mt to naphtha CIF NWE cargoes, according to Platts data on Tuesday, and this was considered close to break-even levels at which petrochemical producers would switch from naphtha.
The propane discount over naphtha was down down from a $35/mt premium on December 10,and down from a $37.75/mt discount at the beginning of the year, Platts data showed.
Cracking propane yields less crude C4 and butadiene than naphtha.
Crude C4/butadiene producers in Europe were already eying higher prices in January after limited spot supply in December due to production issues at Total’s butadiene unit in Gonfreville, France, according to market sources.
“I don’t think that people are willing to let tons go at a discount price and risk having to buy those tons back at a higher price,” a trader said.
“It just adds to the shortage caused by the Total shut down. [Some producers] are cracking propane all the time to an increasing extent,” a second trader said.
He added that usually during the winter propane was more expensive than naphtha because of its use for heating but that this winter that was not the case. “Maybe the seasonality is not totally gone [but] it’s one of the factors that you have to look at when you consider C4 and butadiene,” the he said.
The same trader source said that you would normally require a discount of $70-80/mt to naphtha to make switching to propane economically attractive.
“There is normally more crude C4 and more butadiene available and lower prices in the winter — that’s been the mechanism over the past 30 years and this has changed because of the abundant availability of propane in the US in the past two to three years. So when they can do [switch] they will do so.”
Producers said that they would not be willing to sell crude C4 below a factor of 1.15 to naphtha, whilst buying interest, mainly for export to the US was only seen at 1.03-1.05. No local buying interest has been seen so far.
Meanwhile, in the butadiene market, producers were citing offers upwards of $1,285/mt FOB ARA, whilst buyers were unwilling to pay above the $1,250/mt.
The factor of crude C4 to naphtha was last assessed at 1.04 over naphtha or $1,001/mt CIF NWE, whilst butadiene spot prices were assessed at $1,260/mt FOB ARA, and Eur960/mt FD NWE.
Source: platts.com
