US LPG exports to Asia surge, not to China this time

US LPG exports to Asia surge, not to China this time

US LPG exports to Asia are surging to a multi-year high in February but incremental supplies are not likely heading to China amid ample supplies.

27 February, 2023
Serena Huang
Serena Huang, Head of APAC Analysis

Global LPG loadings are pushing towards a record high in February bolstered by a surge in US exports to Asia. A favourable arbitrage amid robust demand from East Asia and the cooling of VLGC freight rates (vs last quarter) have propelled US LPG exports to Asia to nearly 1.25mbd this month, a multi-year high. While destination countries for these incremental supplies are not immediately clear as several in-transit cargoes have yet to indicate a firm destination, recent import volumes into East Asian countries are revealing interesting trends.

US LPG exports by destination region (mbd, LHS) and percentage to Asia (%, RHS)

Japan and South Korea imports rise, China falls behind

Japan and South Korea are leading the increase in imports from the US, with volumes in Jan/ Feb up 33% and 7% respectively versus Q4 2022. China, on the contrary, has bucked the trend, registering a 25% decline during the same period. Total LPG imports into the country are estimated to fall to 740kbd this month, the lowest since last April. The slump in import volumes has come on the back of increased domestic production owing to higher state-owned refinery runs, lacklustre PDH margins forcing operators to reduce runs further, and possibly slowing residential heating demand as temperatures rise. At present, at least six PDH plants in China are undergoing maintenance, while another two are scheduled for shutdown in March, according to Argus data, keeping a lid on the country’s LPG imports.

Despite the downbeat market sentiment, two new PDH plants, Guangxi Huayi New Material and Yangchang Zhongran Taixing were commissioned in the recent two weeks, further adding to the well-supplied propylene market. PDH plants are also facing competition from new ethylene crackers Sinopec Hainan, PetroChina Jieyang and PetroChina Guangdong that started up in the recent months, which could drive further rate cuts from less efficient PDH plants if margins do not pick up.

East Asia LPG imports (kbd)

Asia’s LPG import momentum slows, US arbitrage narrows

Higher US LPG exports to Asia have come at the expense of lower supplies to Europe, pushing propane prices in Northwest Europe to a seven-month high in February. But exports to Europe are likely to recover as the US – Asia arbitrage has narrowed towards near parity in the recent week. As East Asia’s winter heating demand recedes, slowing LPG import appetite is expected to weigh on regional prices. Nonetheless, lower Middle East LPG exports amid OPEC’s crude production cuts and the prospective start-up of new PDH plants in China are likely to provide a floor on Asia’s LPG prices.

Look out for our special report this week to gain a comprehensive view of the global LPG market.

Serena Huang
Head of APAC Analysis
Serena Huang
Serena leads the APAC energy market analysis with over eight years of technical and commercial industry experience. Prior to this, she was a senior market analyst in Wood Mackenzie, taking a key role in Asia’s crude and refined products analysis, refinery benchmarking and offering thought-leading insights on the market.