The fallout from the arctic blast that took out some of the biggest US refineries is being felt across the Pacific Ocean in Asia, where plastics makers are facing surging prices for key feedstocks.
The US is a major supplier of naphtha and propane — which are turned into petrochemicals used to make everything from medical masks to vehicle interiors — to Asia.
While refineries in the US are slowly restarting, it looks set to be a messy process that could take several weeks.
Photo: Bloomberg
Naphtha in Japan is up by about 8 percent since Feb. 11 and was at the widest backwardation, a market structure indicating tight supply, in a year this week.
Prices for propane, a type of liquefied petroleum gas (LPG), for delivery late next month and early April to Asia are fetching premiums of US$28 to US$45 a tonne over the regional benchmark, traders said, from as low as US$3 for delivery at the end of this month.
The big freeze’s impact is rippling through energy supply chains in different ways.
Asian plastics makers are facing higher costs, but the region’s producers of fuels such as gasoline are benefiting from refinery shutdowns.
Asia needs about 2.5 million tonnes of naphtha from the US and Europe both next month and in April, said Armaan Ashraf, an analyst at FGE.
However, the US is forecast to send just 910,000 tonnes to the region this month, according to estimates from Vortexa, down from 1.2 million tonnes last month.
“The US is pulling more than usual volumes of oil products from Europe,” Ashraf said. “So there’s a chain reaction across the board.”
A similar trend is happening with propane.
US LPG exports to Asia are just under 1.1 million tonnes so far this month, Vortexa said, down from 2.6 million tonnes last month.
About 11 LPG tankers are in the Houston Ship Channel to pick up cargo, while 27 are waiting to get in, ship-tracking data showed.
The surge in feedstock prices is hitting Asian importers, including Formosa Petrochemical Corp (台塑) in Taiwan, LG Chem Ltd and Lotte Chemicals Corp in South Korea, and Reliance Industries Ltd in India.
Prices might ease once the LPG backlog starts getting cleared in April, but higher-than-usual demand due to the cold weather might keep benchmark prices firm, traders said.
That would in turn result in higher demand and prices for naphtha, Ashraf said.
There would also be much more incentive to blend the naphtha into the gasoline pool in the US as the motor fuel’s prices have soared, he said.
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