NEW DELHI- South Korean petrochemical producers are maximizing the use of cheaper feedstock liquefied petroleum gas (LPG) at their crackers, reducing naphtha demand from the region’s top importer, according to industry officials and government data.
The raw material switch has enabled South Korean cracker operators to increase their operating rates, despite struggling from weak petrochemical margins amid oversupplies.
Lower naphtha imports by South Korea could further depress the margins for Asian refiners in the summer months of May and June, when LPG is typically cheaper due to a fall in heating demand. The United States, Asia’s top supplier of LPG, stands to benefit from rising cracker demand.
South Korea’s naphtha imports slipped to about 18.13 million barrels in April and 17 million barrels this month, Kpler data showed. LSEG Research estimates April volume at about 18.59 million barrels and May imports at around 18.34 million barrels.
Both April and May levels are down from the March volume of about 22 million barrels, Korea National Oil Corp data showed.
Naphtha is used in making consumer goods like plastics and textile fibers.
LPG consumption at South Korean crackers jumped about 56 percent on-year to 7.26 million barrels in March, bringing the first-quarter use to 16.81 million barrels, up about 22 percent from the same period last year, government data provided by the Korea Petrochemical Industry Association (KPIA) showed.
In contrast, naphtha consumption at crackers slipped about 8 percent to 36.4 million barrels in March, compared with 39.4 million barrels in the same month last year, the data showed.
“South Korea’s naphtha cracking facilities have expanded their capacity to feed LPG in order to diversify their feedstock,” Lim Jonghyun, a KPIA representative, told Reuters.
