Industry experts have recently forecasted that naphtha supply in Asia will remain tight over the next few years, pushing petrochemical producers to turn to liquefied petroleum gas (LPG) as an alternative feedstock for ethylene cracking. With LPG being more cost-effective, manufacturers can significantly reduce input costs and boost their profit margins. The demand for naphtha is expected to outpace its supply in the coming years, especially as the petrochemical industry continues to expand. As new capacity comes online and end-user demand in sectors like plastics and textiles grows, the pressure on naphtha supplies will only increase. This situation is making LPG a more attractive option for many companies looking to optimize costs and maintain competitiveness. According to a senior consultant at Nexant, Asian petrochemical firms will still rely primarily on naphtha but are likely to incorporate LPG into their feedstock mix. The increasing use of LPG has already been observed, particularly in the production of basic chemicals such as propylene. Meanwhile, Purvin & Gertz Singapore analysts noted that some manufacturers have found it more profitable to blend LPG into their cracker feedstocks, offering a financial incentive to diversify their raw material sources. Major players like PetroChina and Formosa Petrochemical in Taiwan have confirmed that their crackers will continue to use LPG as a key raw material. This shift has largely been driven by rising naphtha prices, which hit a record high of around $740 per tonne earlier this year (Japan, cost and freight). Similar trends are evident in South Korea and Japan, where other cracker operators are also turning to LPG. Looking ahead, Purvin & Gertz predicts that global LPG supply will grow by 20% by 2010, reaching 273 million tons. This increase, combined with the current price advantage—where LPG, especially butane, is 11% to 13% cheaper than naphtha—is prompting many petrochemical companies to reconsider their feedstock strategies. Companies that have been heavily reliant on naphtha are now exploring alternatives, especially new projects that should prioritize feedstock diversification from the start. Japanese firms like Showa Denko and Mitsui Chemicals are already planning to increase their use of non-naphtha feedstocks, aiming to make up 30% to 50% of their total raw material needs. This shift reflects a broader trend in the region, as companies seek to mitigate risks associated with volatile naphtha markets and capitalize on more stable and cost-effective alternatives.

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