H2, 2023 China LPG Prices to Bottom out
China’s LPG prices rose at first and then went down in H1, 2023, mainly influenced by the decline in international crude oil prices, unexpected LPG supply increment and limited demand recovery. China’s economy will probably continue to recover, and the demand for LPG is likely to improve. Moreover, the international crude oil prices are likely to move upward. Accordingly, it is predicted that China’s LPG prices will probably bottom out in H2, 2023. However, the increments in LPG prices may be limited in the wake of supply-demand mismatch.
According to SCI’s data, China’s LPG prices declined after rising in H1, 2023. Therein, the highest LPG price was in January, and the lowest level appeared in June, as the international crude oil prices dropped dramatically and the overall market supply and demand fundamentals underperformed. From January to June 2023, China’s civil-use gas prices averaged RMB 4,949/mt, down RMB 1,069/mt or 17.76% Y-O-Y. Meanwhile, China’s C4R2 average price was RMB 5,878/mt, down RMB 415/mt or 6.60% Y-O-Y.
As for the civil-use gas market, China’s civil-use gas prices rose at first and then moved downward. Therein, the overall market trading atmosphere improved somewhat in January, backed by the demand recovery. However, the overall demand recovery was lower than expected, and the overall LPG supply remained high, dragging down dealing prices of civil-use gas. In Q2, 2023, civil-use gas prices saw notable declines in the wake of sluggish demand. According to SCI’s data, China’s highest civil-use gas price was RMB 5,800/mt in early February, and the lowest level was RMB 3,723/mt at the end of June. In terms of the C4R2 market, China’s C4R2 prices witnessed dramatic fluctuations. Supported by macro environment and demand improvement, China’s C4R2 prices rose notably in Q1, 2023. However, profits at LPG deep-processing enterprises underperformed in Q2, 2023, weighing on the downstream procurement enthusiasm. Accordingly, China’s C4R2 prices moved downward. Therein, the highest C4R2 price was RMB 6,752/mt in early February, and the lowest level was RMB 4,492/mt in mid-May.
Directly influenced by the decline in international crude oil prices, LPG supply increment and limited demand recovery, China’s LPG prices went up at first and then fluctuated downward in H1, 2023.
LPG is a kind of by-product during oil processing, so the crude oil prices directly influence LPG prices. Meanwhile, China’s LPG import dependent degree is relatively high. In H1, 2023, the international crude oil prices fluctuated downward, and LPG import costs went up and then dropped. Accordingly, China’s LPG prices rose and then dwindled in H1, 2023.
The international crude oil prices fluctuated within a wide range and hovered at $70-90/bbl in H1, 2023. In May, the rebound in international crude oil prices weakened somewhat, so the overall international crude oil prices hovered at $70-80/bbl. The international crude oil prices witnessed notable Y-O-Y declines in H1, 2023, weighing on China’s LPG market.
As for China’s LPG import costs, the February CP was the highest, and the July CP hit a relatively low level. The February CP increased notably from January CP, exerting bullish impacts on China’s LPG market in H2 January. Entering February, the international LPG prices kept dipping, and market participants adopted cautious attitudes to the LPG market. Accordingly, most downstream users maintained just-needed procurement. China’s LPG import costs kept dipping, weighing down China’s LPG market prices. Therefore, China’s civil-use gas prices hit a relatively low levels by the end of June.
China’s LPG supply climbed up, but the overall demand recovery was lower than expected.
China’s crude oil processing volume went up in H1, 2023, propping up LPG output. Meanwhile, China’s LPG import also saw notable increments, backed by decline in import costs, positive PDH unit profits and LPG import arbitrage. China’s LPG import remained high for three months and reached 3,319kt in May 2023, hitting a historical high. According to SCO’s data, China’s LPG supply totaled 33,883.1kt in H1, 2023, up 3,230.7kt or 10.54% Y-O-Y. Therein, China’s LPG output was 18,525.9kt, up 3.19% Y-O-Y. Meanwhile, it is predicted that China’s LPG import may be 15,357.2kt in H1, 2023, up 20.93% Y-O-Y.
Considering that the increment in LPG supply at state-owned refineries was limited, the LPG inventory at producers fluctuated moderately. Meanwhile, China’s LPG port inventory kept rising and hit a two-year high level, as the increment in downstream consumption was lower than that in import arrivals.
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