Rising South Korean cracker rates to boost LPG demand

South Korean crackers are running harder as margins recover, writes Toong Shien Lee

South Korean cracker operators are aiming to raise run rates this month because of recent gains in ethylene and butadiene prices, raising demand for LPG feedstock with propane and butane still at a discount to naphtha.

Hanwha Total will lift utilisation at its 1.55mn t/yr Daesan cracker to 100pc from 92pc in March, while KPIC has already raised its 800,000 t/yr Onsan cracker rates to 90pc from 80pc. LG Chem is also planning to increase run rates at its 1.15mn t/yr Yeosu 1 cracker to 70pc from 64pc, at its 800,000 t/yr Yeosu 2 cracker to 80pc from 73pc, and at its 1.27mn t/yr Daesan unit to 67pc from 64pc.

GS Caltex is mulling raising utilisation at its 700,000 t/yr Yeosu cracker this month, as is Lotte Chemical at its 1.2mn t/yr Yeosu and 1mn t/yr Daesan units. Hyundai Chemical may ramp up rates at its 900,000 t/yr Daesan cracker to 60pc from 55pc in March, market participants say. The increase in olefin supplies from South Korea is expected to be partially offset by turnarounds at crackers in Japan.

The plan to increase rates comes as cracker margins recover in line with rising ethylene and butadiene prices, although margins remain in negative territory. Naphtha cracking margins rose to -$104/t by 28 February from -$304/t at the start of 2024 — the highest since May 2023, Argus data show. Propane cracking margins have recovered more rapidly as propane prices have fallen relative to naphtha, climbing to -$2/t by 28 February from -$240/t on 3 January. Flexible Asian crackers have shifted to propane from naphtha since January to maximise production margins.

Expectations of tighter ethylene and butadiene supplies in the region have pushed up prices to multi-month highs. The ethylene fob northeast Asia price rose to $935/t on 21 February from $820/t on 3 January, the highest since March 2023. Butadiene fob northeast Asia values increased to $1,270/t on 23 February from $898/t on 5 January, the highest since July 2022.

NE Asian fob ethylene, butadiene