Operating Rates of Alkane Deep-Processing Units Underperformed
China’s LPG import arrivals gradually rose with deep-processing capacity expansion, and China’s LPG import dependence degree remained over 40%. From November to December 2022, operating rates of alkane deep-processing units came in short of expectations. Although the civil-use demand may give support to China’s LPG market, it is estimated that China’s LPG import arrivals will go down.
China’s LPG import dependence degree surpassed 40%, and most resources were imported into China via VLGC. Based on 29 importers and VLGC import arrivals, China’s LPG import arrivals totaled 22,280kt from January to November 2022, up 1,480kt or 7% Y-O-Y.
China’s LPG deep-processing capacity expanded, driving up LPG import arrivals.
According to SCI’s VLGC shipment, the monthly average import arrival was about 2,030kt from January to November 2022, up 120kt or 6.02% Y-O-Y, mainly backed by the industrial-use gas demand improvement. From December 2021 to November 2022, the crackers at Fujian Gulei Petrochemical and Sinopec Zhenhai Refining & Chemical came on stream, and the PDH units at Zibo Qixiang Tengda Chemical, Jiangsu Sierbang Petrochemical, Liaoning Kingfa Technology were put into use. With cracking and dehydrogenation capacity further expanding, China’s LPG import arrivals went up.
Civil-use LPG consumption saw notable seasonality.
According to SCI’s data, the consumption volume of imported LPG resources in deep-processing and civil-use markets saw notable M-O-M changes. As for the civil-use gas market, despite the relatively low consumption volume in February and March due to the Spring Festival holiday, the consumption of civil-use LPG is relatively low in July and increases notably from August. As for the deep-processing market, the monthly deep-processing consumption was higher than 1,000kt. Taking the PDH industry as an example, the month operating rate of the PDH industry hovered at 70%-90%, mainly influenced by profits.
PDH unit operating rate increased in October 2022, backed by favorable profits.
According to SCI’s data model, profits of PDH units averaged RMB 637/mt in 2021. As of the end of October 2022, PDH units experienced an average profit loss of RMB 412/mt. From January to October 2022, the PDH unit profits remained negative from March to September 2022, so PDH unit operating rates were relatively low. In February and October 2022, PDH unit profits were positive, and the PDH unit operating rate surpassed 80%.
PDH units experienced profit losses in November 2022, and operating rates of PDH units declined somewhat accordingly. Therefore, LPG consumption in the deep-processing industry went down. The civil-use gas demand improved somewhat from H2 November, influenced by the cold wave. The alkane deep-processing profits will probably underperform, so the operating rate of the alkane deep-processing industry is likely to go down. Given the bearish attitudes to January CP and the Spring Festival holiday, it is estimated that China’s LPG import arrivals in December will slightly decline M-O-M.
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