Two more petrochemical companies building propane dehydrogenation or PDH plants in China have recently concluded purchase contracts with several trading and oil companies, taking a mixture of Middle Eastern and US propane cargoes, industry sources said Friday.
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That brings to six the number of petrochemical firms that have sealed propane import deals to feed their PDH projects, as more petrochemical producers complete their new plants this year after state-owned Tianjin Bohai Chemical Industry Group started the first facility in October.
Zhejiang Satellite Petrochemical Co. was heard to have signed deals with three trading firms: Japan's Astomos, Sojitz and possibly South Korea's E1 Corp., traders said. Each trader will supply three 22,000-mt parcels over 2014 for a total volume of 198,000, the sources added, though this could not be immediately confirmed.
"The Huachen terminal discharge size can only take a 22,000-mt parcel, so Satellite is not able to receive full cargo of about 44,000 mt each," one source said.
The cargoes comprise a combination of propane from the Middle East, priced off the Saudi Contract Price, and from the US, priced off the Mont Belvieu marker, sources said.
Another firm, Ningbo Haiyue New Materials, was heard to have signed deals with South Korea's SK Gas and a major oil company, traders said.
SK will supply two 44,000-mt cargoes this year, which will be delivered starting from the second quarter, traders said, though others said it could be three cargoes.
Details of another deal inked with an oil major could not be confirmed. While some sources said it could be for this year and next, others said it could be for 2015-17.
Sources said the deals with Ningbo Haiyue cover propane from the Middle East, priced off the Saudi CP. MORE PDH PLANTS IN THE WORKS
Ningbo Haiyue is building a PDH plant in Ningbo, Zhejiang province, with annual propane demand of 720,000 mt that is set for completion in the second quarter of this year to meet rising demand for polypropylene and other chemicals. The facility is designed to produce 600,000 mt/year of propylene, which sources said would largely be sold to domestic users.
Satellite Energy is building a PDH plant in Pinghu, Zhejiang, in two phases, with an annual propane demand of 540,000 mt and 900,000 mt. The first phase is due later this year and the second by 2015.
The first phase of the facility can produce up to 450,000 mt of propylene and the second is expected to produce about 750,000 mt, according to industry sources.
The latest deals follow those signed last year by four other Chinese petrochemical firms, who altogether bought 8.27 million mt of propane from the US for deliveries over 2013-20 via trading firms, traders said at the time.
The four are Tianjin Bohai Chemical, which bought US cargoes from Targa Resources via trading firm Everglory; Zhangjiagang Oriental Energy, which bought from Targa and Enterprise Product Partners via Vilma and E1; Fujian Meide Petrochemical, which also bought from Targa; and Shaoxing Sanyuan Petrochemical, which bought Targa cargoes via SK Chemical.
Shaoxing Sanyuan is expected to start its plant in Zhejiang province around April, market sources said. It will use 540,000 mt/year of propane and will be able to produce 450,000 mt/year of propylene.
The six companies are among nine firms building 11 PDH plants in eastern and southern China by 2015, which are projected to require 8.04 million mt/year of propane.
Four more PDH plants are planned to be built after 2015 and one likely in 2017. If these five projects are realized, they are expected to require 3.13 million mt/year of propane, sources had said.
Other than buying via term contracts, Chinese petrochemical makers are also sourcing spot cargoes from trading firms, sources said.
Chinese buyers face difficulties in procuring US propane directly from Enterprise and Targa, as they must meet international standards and conditions of credit required by US firms such as opening upfront standby letters of credit, prompting them to buy via trading firms and incurring higher costs, sources said.
This has prompted them to seek more cargoes from the Middle East, and in recent months, more Chinese trading firms have been seen buying CFR cargoes from Iran, including via term deals, traders and shippers said. But it was not immediately known if any of the Iranian cargoes have also been sold to the petrochemical firms building the PDH projects.