Market Overview:

This week, the domestic LPG market broke the previous stable pattern, and was significantly affected by the sharp escalation of geopolitical conflicts in the Middle East, resulting in a large-scale and significant rapid increase in prices. As of March 5th, the benchmark price of LPG monitored by SunSirs has risen to 5,000.00 RMB/ton, an increase of 12.11% compared to the beginning of this month (4,460.00 RMB/ton). The core driving force behind this round of upward trend is the strong concern of the market about the interruption of import supply. Emotions dominated the trend in the first half of the week, while the second half gradually returned to the game between fundamentals and news.

Core driver:

The core of this week's market changes is the sudden escalation of the Middle East geopolitical conflict on February 28th. As the regional situation worsens, the shipping safety of the Strait of Hormuz, the throat of global energy transportation, is directly threatened, and there have been signs of stagnation at one point. As the core supply area of liquefied petroleum gas (LPG) globally, the expectation of hindered exports from the Middle East quickly spread to the domestic market. Due to China being the world's largest importer of LPG and a high dependence on Middle Eastern sources, concerns about import disruptions have led to increased reluctance among domestic traders to sell. Refineries and ports have taken advantage of this opportunity to significantly increase prices. Although the fundamentals were weak in the early post holiday period, the supply risk expectations brought by unexpected events quickly overwhelmed the conventional supply and demand logic, becoming the main driving force for price increases this week.

Regional market performance:

This week, prices have significantly increased in various regions, but due to differences in import dependence and downstream structure, the increase shows regional differences.

South China: As the region with the highest dependence on imports, the market response is the fastest and most intense. The terminal price has increased by 150-200 RMB/ton compared to the end of February, and the import warehouse area has a strong willingness to push up prices due to concerns about future shipping schedules. The current mainstream price is running in the range of 4,800-5,000 RMB/ton, with some high-quality imported gases priced higher, becoming a high priced area in the country.

East China region: Coastal refineries and ports have simultaneously raised prices, with a general increase of 100-150 RMB/ton. In addition to the demand for combustion, the rigid demand for LPG (such as C4 after ether) from local chemical enterprises has provided strong support, making the price performance relatively firm. The current mainstream price is between 4,600-4,800 RMB/ton.

North China region: Driven by Shandong and surrounding markets, the price increase is relatively mild, about 50-100 RMB/ton, and the current mainstream quotation is 4,300-4,500 RMB/ton. Under the downstream buying mentality, the purchasing enthusiasm has increased compared to the previous period.

Central and Northeast China: Prices follow the mainstream market upward trend. The daily price increase in Central China once reached 50-300 RMB/ton, and the average price rose to around 4,500 RMB/ton. The market in Northeast China is active in trading, with a positive buying sentiment and a continuous upward trend in prices.

Future outlook:

Looking ahead to next week, the LPG market may enter a high volatility phase, with mixed long and short factors:

1. Supply side: In the short term, imported goods in transit before mid March will continue to arrive at ports, and there has not been a substantial shortage of spot supply in the market. But if the situation in the Middle East continues to be tense, it will directly affect the future delivery volume, and the supply gap may truly become apparent at that time. Meanwhile, some refineries in North China, such as Shijiazhuang Refinery, are scheduled for maintenance in mid March, which may have an impact on local supply.

2. Demand side: Currently, terminal combustion demand is gradually entering the traditional off-season as temperatures rise. However, due to downstream fears of price increases, some tertiary stations and chemical companies are stocking up in advance, which supports prices in the short term. It is worth paying close attention to whether the demand for post ether C4 and other chemical products can maintain a high operating rate under cost transmission.

In summary, the LPG market has completed the transition from "fundamental pricing" to "event driven pricing" this week. It is expected that prices will closely follow the progress of the Middle East situation and changes in import shipping schedules in the short term, showing a wide range of fluctuations. It is recommended that businesses remain cautious, closely monitor news trends, control inventory reasonably, and avoid chasing after gains and selling losses.

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