South Korean steam crackers to use more LPG feedstock from July as discount to naphtha widens

MOSCOW (MRC) -- The diverging price spread between LPG and naphtha in recent weeks has incentivized South Korean petrochemical producers to partially switch feedstock from naphtha to LPG from July, reported S&P Global with reference to market participants' statement.

South Korean naphtha buyers Hanwha Total, LG Chem, Lotte Chem and YNCC have all purchased LPG to take advantage of the cheaper feedstock, company sources have confirmed in recent days.

"Most of the South Korean crackers have bought LPG," a South Korean naphtha end-user said.

LPG typically becomes economically viable as a steam cracker feedstock when its price is 90% that of naphtha, or lower. Steam crackers typically begin utilizing more LPG when it is USD40-USD50/mt cheaper than naphtha, sources said.

The physical spread between CFR North Asia propane and CFR Japan naphtha averaged 91.11% in June, while the spread between CFR North Asia butane and CFR Japan naphtha averaged 86.8%.

With LPG commanding a sizable discount to naphtha in June, South Korean steam crackers emerged to purchase July and August delivery LPG to lower dependence on the use of naphtha.

Naphtha supply has been tight for July and August delivery cycles, firming prices as few cargoes were available due to refinery run cuts and limited Western arbitrage shipments, market sources said.

South Korea's Yeochun NCC has bought two spot cargoes of butane for delivery over July and August, sources said.

Lotte Chemical has lowered its naphtha requirements for August and purchased additional spot LPG recently for its steam cracker in Yeosu, confirmed a source aware of the matter. The company's Yeosu facility is able to produce 1.18 million mt/year of ethylene and 550,000 mt/year of propylene.

LG Chem has plans to utilize more LPG for its steam crackers in July, at around 15,000 mt more than in June, confirmed a source aware of the matter. The company's Daesan and Yeosu steam crackers have ethylene production capacities of 1.27 million mt/year and 1.18 million mt/year, respectively.

Hanwha Total Petrochemical recently purchased an evenly-mixed cargo via spot tender for delivery over the second half of July. Hanwha Total has a propane cracker with an ethylene production capacity of 310,000 mt/year.

Petrochemical makers in South Korea and Taiwan are typically the first to capitalize on cheaper LPG as feedstock for cost advantage; however not all steam crackers can switch easily to using more LPG and some may require a steeper discount to make it viable, sources said.

As MRC wrote previously, on 4 March, 2020, Lotte Chemcial shut its naphtha cracker after an explosion at the plant in the southwestern city of Seosan, which injured 31 people. The explosion, which was triggered by a fire at a compressor in Lotte Chemical’s naphtha cracker at around 3 a.m. local time (1800 GMT), was soon contained and under control, the company said then in a statement. The cracker may resume production this October, although initially the restart was planned in a couple of weeks after the accident.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

MOSCOW (MRC) -- Tosoh Silica Corporation (headquarters: Minato Ward, Tokyo), a member of the Tosoh Group, recently decided to establish a joint venture with Namhae Chemical Corporation of South Korea and construct a base to produce silica for use in fuel-efficient tires, as per the company's press release.

Demand for silica for fuel-efficient tires is expected to increase in line with a continued reduction in automotive fuel consumption as well as a shift towards vehicle electrification. Silica exhibits superior effectiveness in improving tire performance by reducing rolling resistance, which leads to enhanced automotive fuel economy.

Utilizing the advanced technological capabilities it has cultivated, Tosoh Silica will establish the second production base overseas to satisfy robust demand, ensure a stable supply of products, and strengthen the profitability of the business.

As MRC reported previously, Japan's Tosoh Corp has brought on-stream its naphtha cracker following a planned outage. The company resumed operations at the cracker on April 20, 2020. The cracker was shut for maintenance on March 4, 2020. Located at Yokkaichi in Japan, the cracker has an ethylene production capacity of 527,000 mt/year and a propylene production capacity of 315,000 mt/year.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.

Tosoh is one of the largest chlor-alkali manufacturers in Asia. The company supplies the plastic resins and an array of the basic chemicals that support modern life. Tosoh's petrochemical operations supply ethylene, polymers, and polyethylene.
MRC

MOSCOW (MRC) -- Enterprise Products Partners' planned Sea Port Oil Terminal offshore of Houston is facing new delays now that the federal government has stopped the clock on the licensing process to allow Enterprise more time to answer questions and provide additional information, reported S&P Global.

The regulatory US Maritime Administration said it suspended the timeline for the SPOT project that is the leading contender to be the first deepwater Texas terminal built to export crude oil around the world.

"SPOT provided some responsive information but also notified the US Coast Guard that additional time would be needed to fully respond," MARAD noted in a new letter to Enterprise.

The delay is not particularly surprising because Enterprise said in late April that it no longer expected to receive federal approval for SPOT in 2020 amid the coronavirus pandemic and the global collapse in crude oil demand. Enterprise had previously planned to start construction as soon as this summer and open the terminal in 2022 after receiving its federal license no later than June. However, the two-year construction timeline now pushes the project's completion to at least 2023.

Enbridge partnered with Enterprise on the SPOT project in December - abandoning its competing Texas COLT project in the process - and Chevron already is signed on as the anchor customer.

SPOT is proposed to be built about 30 miles offshore of Freeport, which is due south of Houston. The deeper-water depths offshore are needed for Very Large Crude Carriers to load up to capacity. SPOT would be able to load 2 million b/d and simultaneously two VLCCs at a time.

Enterprise has remained committed to the project though.

"The company is working on addressing information requests from USCG/MARAD, reviewing submittals from the public comment period, as well as other input from landowners and public officials," Enterprise spokesman Rick Rainey said in a late June 8 statement. "This work includes evaluating options to meet our business needs while mitigating concerns that have been expressed. We are in regular communication with USCG/MARAD and other federal and state regulators to help assure that these considerations are integrated smoothly into the permitting process."

The project has faced opposition from environmental groups and some local communities.

As of early this year, there was a race to build the first deepwater oil exporting terminals offshore of the crude oil hubs near Houston and Corpus Christi. However, the coronavirus pandemic has put that race on hold -- if not canceling the race outright.

Multiple proposed offshore oil-exporting terminals already were shelved or merged with other projects even before the pandemic.

The only other project with substantial backing thus far is Phillips 66's and Trafigura's planned Bluewater terminal offshore of Corpus Christi.

Pearce Hammond, a midstream analyst with Simmons Energy, questioned on June 9 whether any of them will be built.

"The bigger issue at this point, in our view, is how needed is the terminal in light of the changed dynamics for the US oil market post COVID?" Hammond stated in a note. "Does the terminal get built because it is a much cheaper and more efficient means of exporting crude (and replaces existing less efficient crude export terminal capacity), or does the terminal not get built because the global need for higher US crude exports has been redefined lower post COVID? Time will tell."

Already, US crude exports in 2020 have fallen from a high of 4.38 million b/d for the week ending March 13 down to 2.79 million b/d for the week ending May 29, according to the US Energy Information Administration. And analysts project crude export volumes to further plunge in the coming months.

Only one Gulf of Mexico port, LOOP, can fully load VLCCs currently without lightering from smaller vessels. However, LOOP was built primarily for imports and has only more recently added crude-exporting capacilities.

As MRC reported earlier, Enterprise Products Partners LP (EPP), through one of its affiliates, has entered a long-term agreement with Marubeni Corp. of Japan, under which Marubeni will offtake polymer-grade propylene (PGP) produced from a second propane dehydrogenation plant (PDH 2) currently under construction at EPP’s operations in Mont Belvieu, Tex., for supply to global customers. Concluded on June 16, the PGP offtake agreement is part of a long-term collaboration between EPP and Marubeni that also includes the export of liquefied ethylene, the first 25-million lb vessel of which loaded and sailed from EPP and Navigator Holdings Ltd.’s 50-50 joint venture marine terminal at Morgan’s Point, Tex., in early January, EPP and Marubeni said on June 30.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

MOSCOW (MRC) -- The European Commission says it has approved, under EU state aid rules, Hungary’s EUR46.5-million (USD52.5 million) investment aid to Toray Industries for a new lithium-ion (Li-ion) battery separator film (BSF) plant in the Kozep-Dunantul Region, said Chemweek.

The aid will contribute to the region's development while preserving competition, the Commission says. "The positive effects of the project on regional development clearly outweigh any distortion of competition brought about by the state aid," the Commission says.

The Commission says it would be impossible to carry out the project in Hungary or any other EU country without the public funding, that the aid is limited to the minimum necessary to trigger the investment in Hungary, and that it will contribute to job creation as well as economic development, and to the competitiveness of a disadvantages region.

The project started in 2019 and is planned to be completed in 2023. It will be Toray's first plant to produce BSF in Europe and is expected to create almost 200 direct jobs, the Commission says. The Kozep-Dunantul area is eligible for regional aid under EU law, the Commission notes.

The EU’s guidelines on regional state aid enable member states to support economic development and employment in less developed regions and foster regional cohesion in the EU single market.

BSFs are a key component of Li-ion batteries. They function as the separator of the two major building blocks of a battery, preventing short circuits while allowing the movements of ions, the Commission says.

The Commission launched the European Battery Alliance initiative in October 2017 to support the development of a competitive manufacturing value chain in Europe with sustainable battery cells at its core. There has been tangible progress in creating a European battery production industry, since the launch of the initiative, the Commission says.

As MRC informed earlier, Toray Industries, Inc., announced today that it will lift production capacity for Torayfan oriented polypropylene film for Automotive capacitors by 60% at its Tsuchiura Plant in Ibaraki Prefecture in 2022. The goal is to capitalize on an expanding market for electric vehicles. Torayfan is a lighter plastic film among other plastic films.

According to MRC's ScanPlast report, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

MOSCOW (MRC) -- Eni and NextChem, the Maire Tecnimont Group’s subsidiary for green chemistry, strengthen their partnership one year after their first agreement, as per Eni's press release.

This partnership will conduct research for a new project to be developed in Taranto, in addition to ongoing engineering studies for a waste-to-hydrogen production plant at the Eni bio refinery in Venice, Porto Marghera, and for a waste-to-methanol production plant at the Eni refinery in Livorno.

This phase is aimed at assessing the feasibility of a plant within the Taranto refinery for the production of new synthesis gas from plasmix and dry waste through a chemical recycling process. The gas produced will be then refined and produced through two separate channels: hydrogen, which can be used by the Eni refinery to assist the fuel hydrodesulphurization process; gas with a high carbon monoxide content which can be used by the steel mill both in blast furnace processes and the new Direct Reduced Iron technologies. These studies could make a significant contribution in terms of decarbonization or the steel industry.

NextChem is working on the industrial application of the project. An Eni-NextChem joint team will assess the technical and economic feasibility and plants’ streams. The involvement of local institutions will be crucial.

The agreement signed on 25 June is part of the long-term strategy which will make Eni a leader in the production and commercialization of decarbonized products. Eni is implementing a strategic plan which is unique in the industry and which will allow the Company to reduce absolute net GHG lifecycle emissions by 80% by 2050. Eni will increase its production of green energy, thus developing renewables. It will also produce gas, LNG and hydrogen from gas and from bio feedstocks, removing CO2 through sequestration and storage projects; and it will produce bio fuels from its bio refineries as well as bio fuels, methanol and hydrogen from waste. Furthermore, it will produce chemical products from renewables and first and secondary feedstocks. In particular, NextChem’s technological solution could lead to a significant CO2 reduction from a Life Cycle Assessment perspective, when compared with the available waste to energy treatments of plasmix and dry waste post consumption. Leveraging the principles of the circular economy, the projects are set to have a positive impact on the environment.

NextChem technological innovation is one of the most significant of its kind developed in last few years within the circular economy and energy transition fields and applies to the green recovery of brownfield sites of traditional and heavy industries. Chemical products with a circular origin based on this technology reduce the need for extraction of fossil origin resources and contribute to the decarbonization of relevant industrial sectors, supplying the transport sector – which is contributing significantly to global CO2 emissions - with low carbon fuels. This is one of the NextChem’s drivers for the energy transition, with over 30 innovative projects in its portfolio with proprietary technologies, international licenses and technological integration contracts and EPC.

As MRC informed earlier, Italian oil major Eni is planning to create a division to focus on new energy solutions which could be headed by its CFO, as it steps up preparations for a decarbonised future.

We remind that none of the big oil companies currently meet U.N. targets to limit global warming despite the most ambitious targets set by Royal Dutch Shell and Eni.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC