MOSCOW (MRC) -- Northwest European LPG trade in December rose marginally month on month to an estimated 715,000 metric tons, up from 675,000 metric tons in November, according to Chemweek with reference to OPIS records.
Imports into the region from the US were 165,000 metric tons in December, up from 95,000 metric tons in the prior month, but down from a record 400,000 metric tons in October.
Main LPG imports into northwest Europe are earmarked typically as feedstock for the petrochemical sector, which had seen favorable economics for cracking propane early in December compared to naphtha. However, the propane/naphtha spread swung positive mid-December, after opening the month at minus USD19/metric ton, led by a strengthening propane price. The spread moved considerably further into positive territory by the end of the month, to USD44/metric ton, leaving propane much less attractive for feedstock end-users.
Imports of LPG from the US also slowed during December as the freight rate for the Houston-to-Flushing route for very large gas carriers (VLGCs) rose by nearly 30% in one month to USD90/metric ton from USD70/metric ton, according to shipbroker data. Delays for vessels waiting to transit the Panama Canal, combined with winter heating demand for LPG in Asia, led to a surprise jump in freight rates.
CIF ARA propane prices in northwest Europe rose by USD141/metric ton through December, topping USD507/metric ton by year-end. By comparison, CIF northwest European naphtha prices were up by 50% in the same month, increasing by USD69/metric ton to end 2020 at USD459.75/metric ton.
During December, local North Sea supplies of LPG entering the petchems feedstock pool totaled 248,000 metric tons, equivalent to 58% of total feedstock intake, and down from 290,000 metric tons in November. The remainder of intake from the sector in December consisted of 23% from the US East Coast, up from 13% in November, while imports from the US Gulf Coast made up 16% of intake, up from 11% in November. The retail and refining sector saw LPG intake slightly softer month on month at 165,000 metric tons for December.
Exports out of northwest Europe increased to 125,000 metric tons in December from 95,000 metric tons in November, with cargoes moving to the Baltic, eastern Mediterranean, and US east coast. Several of the US-Europe transit cargoes moved via the back-haul route, as some shippers looked to take advantage of the high market rates in the month. Exports of LPG from port of Ust-Luga in the Russian Baltic to northwest Europe were an estimated 12,000 metric tons.
OPIS is an IHS Markit company.
As MRC informed previously, oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, according to an official with International Energy Agency's (IEA) statement.
We remind that the COVID-19 outbreak has led to an unprecedented decline in demand affecting all sections of the Russian economy, which has impacted the demand for petrochemicals in the short-term. However, the pandemic triggered an increase in the demand for polymers in food packaging, and cleaning and hygiene products, according to GlobalData, a leading data and analytics company. With Russian petrochemical companies having the advantage of access to low-cost feedstock, and proximity to demand-rich Asian (primarily China) and European markets for the supply of petrochemical products, these companies appear to be well-positioned to derive full benefits from an improving market environment and global economy post-COVID-19, says GlobalData.
We also remind that in December 2020, Sibur, Gazprom Neft, and Uzbekneftegaz agreed to cooperate on potential investments in Uzbekistan including a major expansion of Uzbekneftegaz’s existing Shurtan Gas Chemical Complex (SGCC) and the proposed construction of a new gas chemicals facility. The signed cooperation agreement for the projects includes “the creation of a gas chemical complex using methanol-to-olefins (MTO) technology, and the expansion of the production capacity of the Shurtan Gas Chemical Complex”.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, exluding producers' inventories as of 1 January, 2020).