MOSCOW (MRC) -- Rebounding petrochemical demand in northwest Europe, following a second-quarter slump amid lockdowns to check the spread of COVID-19, boosted July imports of liquefied petroleum gas (LPG) by 230% compared to the prior month, reported Chemweek with reference to OPIS data.
LPG intake as feedstock in northwest Europe soared to an estimated 650,000 metric tons from 282,000 metric tons in June. By comparison, LPG cargo imports into northwest Europe were as low as 258,000 metric tons in August 2017, according to OPIS data. North Sea LPG supplies entering the feedstock pool totaled 246,000 metric tons, equivalent to 38% of total July intake, compared to 68% in June. Overall northwest European LPG trade was estimated at 980,000 metric tons in July, up 69% from 580,000 metric tons in June.
Demand uncertainty through June from end-user ethylene and propylene markets arising from the pandemic prompted steam cracker operators to run at reduced rates and curb intake. Spot ethylene at the start of July marked a 20% discount to the monthly term price and weakened to a 30% discount by the end of the month, according to IHS Markit PetroChemWire data. Meanwhile, propylene strengthened through July, shifting to parity to the monthly term price in Europe from a 10-12% discount at the start of the month, the data showed.
As demand began to pick up, feedstock intake sprang higher in July. The contango price structure for propane steepened sharply for July/August, with August pegged at USD7/metric ton above July in mid-June, before widening to USD11/metric ton by the end of that month. The propane/naphtha spread for July also broadened quickly, hitting minus USD109/metric ton by the start of July from minus USD38/metric ton in mid-June, supporting the economics for petchem buyers to increase their intake of LPG as feedstock.
The remainder of the feedstock intake in July saw 14% arrive from the US East Coast, down from 23% in June. A key part of the surge in imports though, came from the US Gulf Coast, which provided nearly half of intake at 46%, up from zero in June. Dwindling exports from the Russian Baltic port of Ust Luga provided just 2% of northwest European LPG intake in July, compared to 9% in June. The retail and refining sector saw LPG intake at 183,000 metric tons in July, up from 116,000 metric tons in June, according to OPIS data.
LPG export cargoes from northwest Europe totaled 127,000 metric tons in July, down from 180,000 metric tons in June. Exports moved to the Baltic region, the US East Coast, Spain, Morocco, and Turkey.
OPIS is an IHS Markit company.
As MRC wrote previously, unplanned outages at Sabic's Wilton, UK, cracker and Borealis' Stenungsund, Sweden, cracker may cause availability shortages in the European propylene coastal market. The Wilton cracker, which has an annual propylene capacity of 415,000 mt was shut on June 17 due to technical issues and was not expected to come back online for another two weeks.
Borealis' Stenungsund cracker unit has remained offline longer than initially anticipated, after it was shut following a force majeure declaration at the site on May 11. Sources said that the unit has been offline longer than initially expected with no confirmed startup date. The Stenungsund cracker has a propylene capacity of 150,000 mt/year.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC