Asian butadiene-butane, propylene-propane spreads slump on downstream weakness

Asia's butadiene margin from feedstock butane remained at more than a nine-month low of $455/mt on Nov. 26, while the regional spread between propylene and feedstock propane languished at a more than one-month low of $155/mt, mainly due to weakness in the downstream markets.

The butadiene-butane spread was last narrower at $420/mt on Jan. 31, while the propylene-propane spread was last lower at $150.50/mt on Oct. 14.

Asian LPG, essentially propane and butane, has been in a general downtrend for most of November, in line with the weakness in Western crude oil values and a slowdown in spot trading activity as market participants focused on fulfilling LPG requirements for the coming winter.

A decline in buying interest for propane from the region's biggest buyer, China, as well as lackluster demand for LPG from the next biggest buyer, India, also dampened sentiment, market sources said.

Both butadiene and propylene prices in Asia have been driven down in recent weeks due to oversupply pressures.

However, the prevailing weakness could be short-lived as S&P Global Commodity Insights analysts expect petrochemical feedstock demand to strengthen in 2025.

Global oil demand is expected to grow by 1.3 million b/d year on year in the fourth quarter of 2024, driven by demand for jet/kerosene and petrochemical feedstocks.

"Much of the growth in the fourth quarter will be coming from Asia due to the travel season and winter heating demand, coupled with some improvement in the petchem sector," Commodity Insights analysts said in a recent report.

The petrochemical sector continues to struggle with overcapacity amid high inflation and slower global economic growth. Nevertheless, so far this year, demand for petrochemical feedstocks has seen healthy increases in China and South Korea in contrast to some declines in Japan and Taiwan.

In Asia, although some companies plan to or have carried out capacity reductions and strategic shifts, the commencement of new steam crackers, particularly those integrated with refineries, is expected to offset petrochemical feedstock losses.

According to the Commodity Insights report, the region's demand for LPG/ethane and naphtha is expected to grow by 400,000 b/d in 2025, up from a growth of 350,000 b/d this year.

Platts, part of Commodity Insights, assessed CFR North Asia propane at $630/mt on Nov. 26, down $1/mt on the day, while CFR North Asia butane was assessed at $630/mt, down $2/mt on the day.

Platts assessed FOB Korea propylene at $785/mt on Nov. 26, unchanged on the day, while FOB Korea Butadiene was assessed steady on the day at $1,070/mt.