Quarterly Update on Global Liquified Petroleum Gas (LPG) Market
For the Quarter Ending March 2021
Due to severe freezing weather in the US Gulf region, LPG supplies were limited in the first half of the quarter. The Gulf freeze catastrophe in the United States heightened the supply related constraints as demand for heating purposes surged and many major production facilities in the region experienced manufacturing disruptions due to the cold weather. The price of Liquefied Petroleum Gas (LPG) in the North American region rose dramatically because of increased demand and sluggish supply, even though the average quarterly price of LPG stood around USD 1665/ton.
LPG supplies in the Asia Pacific region were balanced throughout the first quarter of 2021, owning to the start of a new olefin facilities in China in which 77% of the demand is driven by LPG, followed by the PDH (propane - dehydrogenation) plants in China operating at maximum efficiency. However, temporary operational halts due to the Chinese New Year holidays and production cuts by the OPEC nations showcased some tightness in the supplies. The demand spiked as the winter season hit the northeast Asian region. A leading supplier to the South-eastern region, Saudi Aramco revised its March prices of LPG ratio (50% Propane – 50% Butane) to USD 610/ton and (70% Propane – 30% Butane) to USD 616/ton, registering an increment of +USD 70/MT and +USD 48/MT, from the January settlements.
LPG supplies in the region remained constrained, as imports from the US declined due to inclined domestic demand of the US gulf region. Demand for heating applications rose supported by extreme weather conditions which hit the Northwest European region during the quarter. A major supplier from the Middle East announced a multi-fold increment in the prices of LPG with the offers surging further by increased transportation charges.
For the Quarter Ending September 2020
The Asian LPG demand became resilient in the quarter ending September 2020 as the industrial offtakes improved with plants operating at their full capacities to recover the slumped margins due to pandemic. As majority of Southeast Asian countries cater to their LPG demand through imports, stagnated imports due to Hurricane Laura in the U.S. shrouded the regional buying activities. LPG is anticipated to partially tumble in the coming months with China eyeing to shift the household consumption to piped natural gas. However, several traders are likely to stockpile LPG ahead of the winter season under fears of supply shortage that can interfere with consumer sentiments.
Outlook for LPG considerably improved in August with its increased preference over Naphtha as an industrial feedstock due to the sudden rebound in the Naphtha values. However, with Propane-Naphtha spread decreasing by the end of September, total imports of Northwest Europe showcased a prominent drop by over 10 per cent as compared to August. The fall in offtakes of LPG as a petrochemical feedstock was primarily due to its high prices causing manufacturers switch to other alternative to protect their margins. Furthermore, resurgence in coronavirus in early September has raised serious concerns over the prevailing demand uncertainties in the next quarter.
As many Middle Eastern countries buoyed on increasing the supply of LPG for power generation systems amidst the aggravating heat of August, several companies including ADNOC considerably increased the production output with no substantial increment in the trade flows. The company deviating from its usual service allowed advanced stock purchasing on increased demand from importers. ADNOC agreed to the nominations granting advanced local dates for consecutive two months starting October. Traders perceive this as a smart move that would set the middle east fuel market at optimum and organized inventory levels.