"One-Third the Price of Naphtha"... Petrochemical Industry Pushes for Ethane Adoption

Increased Competitiveness through Diversification of Raw Material Supply

Naphtha Cracking Center (NCC) companies, experiencing the worst business conditions, are pushing for the introduction of ethane for the first time to reduce costs. Although NCC profitability is declining, they cannot stop their plants, so they are diversifying raw material supply to enhance competitiveness.

According to the petrochemical industry on the 24th, LG Chem, HD Hyundai Oilbank, and Hanwha TotalEnergies recently signed a memorandum of understanding (MOU) for joint ethane procurement. They plan to build infrastructure connecting an ethane terminal and plants near the Daesan Industrial Complex in Chungnam by 2028.

LG Chem Daesan Plant NCC Plant. Provided by LG Chem

Ethane is a hydrocarbon produced during the liquefied natural gas (LNG) refining process, which can be cracked to produce ethylene. Compared to naphtha, which can produce a variety of chemical products such as benzene, toluene, and xylene (BTX), ethane has less production diversity, so domestic NCC companies have mainly used naphtha. Currently, ethylene produced from ethane is not made domestically; the only ethane cracking facility (ECC) is operated by Lotte Chemical USA in Louisiana, USA.

However, as international crude oil price volatility has increased recently, causing naphtha prices to fluctuate, the relatively stable and cheaper price competitiveness of ethane has begun to attract attention.

The government has also decided to support facility construction. The Ministry of Trade, Industry and Energy announced in the ‘Measures to Enhance Petrochemical Industry Competitiveness’ released yesterday that it will support a fast-track approval process for the construction of related terminals and storage tanks scheduled from 2026 to 2028. Na Seong-hwa, Director of Industrial Supply Chain Policy at the Ministry, explained, "Ethane prices are about one-third of naphtha prices. Mixing naphtha and ethane operation can improve cost competitiveness."

There are also expectations that ethane supply will increase further with the launch of the second Trump administration. After the Russia-Ukraine war, the U.S. has encouraged shale resource drilling for raw material security, and the Trump administration plans to actively expand U.S. shale gas and oil production. Accordingly, stable and inexpensive ethane supply is expected.

An industry official said, "Using only ethane makes it difficult to completely replace naphtha because products like polypropylene (PP) cannot be produced besides polyethylene (PE). Initially, a 5% to 10% mixing ratio is expected," adding, "Since ethane has never been introduced domestically, new infrastructure must be built."