APPEC: Petchem producers cautious on feedstock procurement amid trade tensions

Geopolitical volatility and trade tensions have led to uncertainty for Asian petrochemical producers in securing feedstocks amid fluctuating crude oil prices, industry experts and S&P Global Energy analysts said at APPEC 2025 in Singapore Sept. 9.

Taking crude oil as an example, April Tan, associate director, technical research, Energy, highlighted how oil prices have fluctuated from nearly $100/b in 2024 to dropping below $70/b over the past few weeks. Such volatility significantly affects petrochemical producers, Tan said.

Tan also added that with oil prices expected to hover around $65/b in 2026, producers will need to be more cautious in selecting their feedstocks.

The panel discussion also discussed the competitiveness of crude oil-to-chemical (COTC) processes as a source of cracker feedstocks.

The majority of COTC's operations right now are taking advantage of integration, Anthony Tso, associate director of C4s and Elastomers, APAC at Energy, said.

Having an integrated facility provides the advantage of streamlined logistics and lower costs, Tso said, adding that nearly 50%-60% of such COTC facilities are dedicated to chemical production.

Tso further said that COTC facilities allow producers to choose between different products such as fuels or chemicals. This, in turn, offers producers ample flexibility in selecting production options that meet current market demand.

Tso also mentioned the upcoming joint venture between Saudi Aramco and South Korea's S-Oil Shaheen thermal crude-to-chemical (TC2C) plant, which is scheduled to start in Ulsan in 2026. Although such a project is a positive step that will help convert crude oil into various petrochemical feedstocks, Tso also pointed out that the costs of such a project may take longer to recover.

Focus on ethane

Economics is currently the major driving factor for producers given the ongoing volatility in the procurement of different feedstocks, Rajesh Rawat, SVP, Head of Cracker at Reliance Industries, said.

Ethane is a prime example of a cheaper feedstock source, although limited availability remains an issue faced by buyers, Rawat said. Various ethane buyers such as India, China, Latin America, and Europe can only turn to the US for their procurement needs, Rawat also said.

Traditionally, producers allocated a large portion of their capital expenditure or capex to their production facilities. However, Rawat said, this is now shifting toward investments in securing feedstocks such as ethane.

Such capex investments do benefit producers, though the risks are equally daunting, he added.

When asked about concerns for ethane buyers relying solely on US producers, Rawat highlighted it as the main risk. These risks are not just trade barriers like tariffs but also include supply chain disruptions, such as blocking key chokepoints like the Suez Canal and terrorist attacks on maritime infrastructure.

Building on the topic of ethane supply, April Tan mentioned the upcoming joint venture between ADNOC and Wanhua Chemicals, which could potentially increase ethane supplies from the Middle East as infrastructure investments start to pay off.

Since natural gas and liquids production is expected to peak by the end of this decade, naphtha production as a feedstock for petrochemicals could increase further, Tan said when asked about the ideal naphtha-to-crude oil spread, which may enable refineries to produce more such feedstocks.

Outlook for monomers

Tso said that demand for butadiene is easier to forecast than for other C4 monomers as its downstream uses are tied to sectors such as automobiles.

Discussing future prospects for other C4 monomers like iso-butylene, Tso mentioned that iso-butylene is primarily used in the production of blend stocks such as MTBE, which has seen struggling demand, especially as demand for mogas remains flat. Besides blend stocks, iso-butylene is also utilized in other downstream products that are expected to see "mild growth" compared to butadiene.

While discussing the availability of key petrochemical raw materials, if ethane cracking continues to grow, Rawat said that rationalization of older crackers in parts of Asia may affect the availability of feedstocks such as the C5 chain.

He said that naphtha crackers do not produce much of products such as isoamylene and dicyclopentadiene, although the market for these products remains robust.

"People need to work on getting C5 streams out of their systems," Rawat said, adding that the shutdown of older crackers will pull away C5 feedstocks from the market.