South Korea's spot supply of solvent-grade mixed xylenes for April loading will fall by up to half of its typical volume because of lower yields from naphtha-fed steam crackers' use of butane in its feedstock mix, a market source said Friday.
"South Korean producers began to mix butane as alternative feedstock substituting for expensive naphtha, it may cause a fall of around 10% in April's solvent-MX output," the source said.
Monthly output of solvent-MX in South Korea is estimated at 30,000 mt, of which around 10,000 mt are sold on spot basis.
The switch to butane feedstock is seen likely to result in monthly output falling to around 27,000 mt, resulting in spot supply falling to around 5,500-7,000 mt/month, or nearly half its usual volume, he 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.
The spread between Platts solvent-MX FOB Korea and Japan naphtha prices was valued at $97/mt last Friday, which indicates the solvent-MX production margin is in negative territory. The breakeven spread for solvent-MX producers is understood to be around $120-150/mt.
Lotte Chemical and LG Chemical were heard to have switched to using 7-10% butane as feedstock at their naphtha-fed steam crackers at Daesan since early March. Still, the expected fall in spot availability is unlikely to provide any support to the April market as the isomer-grade mixed xylenes, as well as downstream paraxylene, purified terephthalic acid and polyester, markets are all seen as weak, market sources said.
"Although the supply in the solvent-MX will be reduced, prices may not be boosted, as isomer-MX and polyester chain are bearish," a market source said.
The spread of isomer-MX/solvent-MX narrowed to $47.80/mt on a FOB Korea basis last Friday, compared with a typical spread of around $100/mt.
