South Korea's Spot Supply of Solvent-grade Mixed Xylenes Loading Will Likely Halve

South Korea's spot supply of solvent-grade mixed xylenes for April loading will likely halve from its typical volume because of lower yields from naphtha-fed steam crackers' use of butane in its feedstock mix, an industry source said Thursday. 

"South Korean producers started to mix butane as alternative feedstock substituting for expensive naphtha... it will result in a 10-15% fall in April solvent-MX production," the source added. 

Monthly output of solvent-MX in South Korea is estimated at 30,000 mt, of which around 10,000 mt are spot volumes. 

The switch to butane feedstock however, may result in monthly output falling to 25,500-27,000 mt. Spot supply is expected to fall to 5,500-7,000 mt/month, or nearly half its usual volume, the same source added. The higher use of LPG was due to rising naphtha feedstock costs. 

When it comes to the use of LPG in steam crackers, butane is preferred as a petrochemical feedstock, especially in South Korea, as opposed to propane. Compared with naphtha, butane raises ethylene and propylene yields, but results in a fall in butadiene production. 

Mean of Platts Japan naphtha was assessed at $948.25/mt Wednesday, up $16/mt on the day, while refrigerated butane on a CFR Taiwan basis was assessed $14/mt lower, at $857/mt. 

"Typically, petrochemical producers switch from wholly naphtha to partial LPG when the latter is valued less than around 97% of the former from summer, but it was moved forward to spring due to recent hiking naphtha prices," a South Korean source said. 

Lotte Chemical and LG Chemical were heard to have switched to using 7-8% butane as feedstock at their naphtha-fed steam crackers at Daesan since early March. 

Fellow South Korean petrochemical firm Yeochun Naphtha Cracking Center has switched to using butane as 10% of feedstock at its No. 1 and No. 2 naphtha-fed steam crackers at Yeosu last Friday, Platts reported previously. Market sources expect that the supply tightness in solvent-MX stemming from lower yields following the change in feedstock mix will likely lend support to prices of April-loading, solvent-MX cargoes. 

Benchmark FOB Korea solvent-MX price has earlier fallen 7.6% from its all-time high of $1,288/mt on December 7, 2012, to be assessed at $1,190/mt on March 1.