BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR
COOKIE NOTICE

Register with us today

and in less than 60 seconds continue your access to: Latest news headlines Analytical topics and features Commodities videos, podcast & blogs Sample market prices & data Special reports Subscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Enter your Email ID below and we will send you an email with your password.


  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

If you are a Platts Market Center subscriber (https://pmc.platts.com), Please navigate to Platts Market Center to reset your password.

In this list
Petrochemicals

Europe petchems switch to propane; discount to naphtha widest in 8 months

Fuel Oil | Marine Fuels

Off-spec Houston bunker fuel sparks contamination crisis

Electric Power

Platts Market Data – Electric Power

Oil | Crude Oil

Platts Workshop at the S&P Global Platts Energy

Petrochemicals

Contango structure in European benzene market at 12-week high

Europe petchems switch to propane; discount to naphtha widest in 8 months

London — Petrochemical buyers in Europe are beginning to crack propane overnaphtha, reversing a seasonal pattern that has typically seen propane attractfeedstock buying in the summer rather than winter months.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

That decline has been driven by a ballooning "pro-nap" spread -- thediscount of the large propane cargo market to the large naphtha cargo market-- the measure used to track propane's attractiveness as an alternativefeedstock.

On Thursday, the propane CIF NWE large cargo market sunk to a $83.25/mtdiscount to the naphtha CIF ARA cargo market, the widest discount since May 3,2017.

The spread began to widen in mid-December, when expectations of an influxof propane product into Europe and a patchy winter heating season helpedpropane weaken even faster than naphtha.

"I think there will be extra propane cracking in Europe and Asia, [weare] starting to see some additional propane cargoes committed to cracking at[the] expense of naphtha," said a market source.

"It looks like we have switching demand all the way up to [propane at]minus $20/mt [to naphtha] and maybe beyond for some," said another sourceactive in the petrochemical market.

That push to switch from propane from naphtha has also been encouraged bymore attractive margins for lighter feedstocks versus heavier ones, accordingto a market source in the LPG market.

Ethane is the "lightest" feedstock, followed by propane, butane, naphthaand gas oil. Cracking lighter feedstocks yields more ethylene and lesspropylene, butadiene and pygas. For example, cracking 1 mt of propane produces0.4 mt of ethylene, whereas 1 mt of naphtha will produce 0.3 mt of ethylene.

Ethylene was at an 11-week high this week, though the most recentlymonthly contract settled at a rollover.

The incentive to switch to propane is unusual mainly because it typicallyoccurs in the spring, when heating demand tails off, leaving prices sinkinglow enough relative to naphtha to become an attractive alternative throughoutthe summer months.

This year, that trend has been reversed, with propane rising againstnaphtha in mid-summer 2017, moving parity to naphtha for the first time inAugust. That was driven almost entirely by supply constraints, with the closedarbitrage from the US Gulf Coast to Europe restricting the flow of inboundproduct, while demand was limited to just one major buyer on the petchemmarket.

By this winter, meanwhile, mild winter demand in Germany and other majorEuropean consumer markets had failed to meet market expectations, whileinbound market product increased, pushing propane down to a discount typicallyseen in the summer months.

--Katherine Dunn, katherine.dunn@spglobal.com--Philip Reeder, philip.reeder@spglobal.com--Edited by Jonathan Dart, jonathan.dart@spglobal.com