SunSirs: LPG: Geopolitical Tensions Combined with Soaring Import Costs Lead to Tight Supply in the LPG Market

Supply Side: Domestic LPG supply stood at 516,000 metric tons, a slight decrease of 200 metric tons from the previous period, remaining largely unchanged. This was primarily due to maintenance at Qingdao Liding’s facility and reduced production at some enterprises. Imported shipments totaled 567,000 metric tons, a slight increase of 0.35% month-on-month, with the majority arriving in East China. Overall supply fluctuations were minimal, but domestic supply levels remained low, with both producer and port inventories showing slight declines. Next week, domestic supply is expected to continue shrinking to around 510,000 metric tons, while import arrivals are projected to drop significantly to 400,000 metric tons, indicating a tightening supply trend.

Demand Side: The production-to-sales ratio for sample LPG enterprises in this period was 99%, down 2 percentage points month-on-month. Market sales weakened, with a pattern of stronger demand in the north and weaker demand in the south. In South China, high prices led to a wait-and-see attitude among downstream buyers, causing the production-to-sales ratio to drop to 95%; in East China, the market failed to achieve a balance due to the impact of low-priced external resources; in Northeast China, Western China, and Shandong, residential gas sales exceeded production. The operating rate for olefin deep processing declined slightly to 47.46%, the alkylation capacity utilization rate fell to 36.96%, and the PDH operating rate dropped significantly by 6.89 percentage points to 56.71%. Overall demand was relatively weak, with chemical demand showing a marked decline. Next week, combustion demand is expected to be moderate, while chemical demand may see a slight increase.

Overseas Prices: International LPG prices remain at high levels as ongoing geopolitical conflicts persist and supply shortages remain unresolved. The expected average CP prices have risen significantly: propane at $662/ton (+6.43%) and butane at $680/ton (+10.21%); CFR South China arrival prices have declined slightly: propane at $1,102/ton (-3.67%), butane at $1,122/ton (-1.75%). Saudi Arabia’s official CP prices for April rose sharply, with propane at $750/ton (up $205 from the previous month) and butane at $800/ton (up $260 from the previous month). High import costs have pushed up the domestic price floor.

Overall, amid geopolitical and supply disruptions, LPG prices are fluctuating at high levels.

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