2024 China LPG Inventory Analysis
In 2024, China’s LPG inventory level at refineries and inventory level volatility were weaker than that in 2023 and hovered at 29%-37%. The decline in LPG inventory at refineries indicated that the LPG market competitions intensified, and most refineries adopted cautious attitudes to storage on the premise of ensuring safe production. The inventory level change at refineries was mainly influenced by fluctuations in international and China’s LPG prices, supply and demand fundamentals, holidays, downstream replenishment cycle, market sentiment, etc. To ensure the safe production at producers, refineries often maintained LPG inventory level at a medium-to-low level. The inventory level at refineries saw notable fluctuations in Q1 2024, especially during the Spring Festival holiday. The LPG inventory at refineries was accumulated gradually during the Spring Festival holiday, due to the insufficient transport capacity and sluggish demand. Refineries needed to plan in advance and cut inventory via lowering selling prices, so the LPG inventory at refineries declined from end-January to early February 2024. During the Spring Festival holiday, the inventory at refineries was gradually accumulated, reaching the highest point of the year. After the holiday, the end demand recovered slowly, so the LPG inventory level at refineries went down from the end of February 2024. Fluctuations in LPG inventory at refineries were relatively mild in 2024, and there were fluctuations sometimes in the wake of supply increment, downstream replenishment cycle, inventory cut before the National Day holiday, etc.
China’s LPG port inventory level in 2024 was slightly higher than that in 2023. In 2024, the average port inventory level was 52.39%, up 0.49% YOY and mainly influenced by the import increment. Usually, port inventory went up in summer and moved downward in winter, but this pattern was not evident in 2024. The port inventory was mainly influenced by a variety of factors such as the import arrivals, fluctuations in international and China’s domestic LPG prices, supply and demand fundamentals, etc. China’s LPG importers cut their procurement during the Spring Festival holiday due to the demand decline, so the LPG port inventory dropped to an annual low in February 2024. After the holiday, China’s LPG importers purchased more resources, but the end demand recovery was slow. Moreover, some chemical enterprises were shut down or cut unit operating rates due to sluggish profits, and the operating rate of the PDH industry once dropped below 60%. Accordingly, China’s LPG port inventory rose gradually. After August 2024, China’s LPG port inventory went down. The PDH industry profit and China’s LPG import arbitrage underperformed, weighing on the import enthusiasm. Accordingly, most importers consumed inventory, dragging down LPG port inventory.
In Q1 and Q2 2024, China’s LPG social inventory level fluctuated in a pattern similar to 2023. Entering Q3, China’s LPG social inventory level saw notable differences from the same period of 2023. Normally, tertiary enterprises would choose to restock at lower prices during summer to raise inventory, then moderately consume inventory levels in Q4 due to the approaching demand slack season. China’s LPG social inventory is related to the seasonality of LPG prices. However, China’s LPG market was fairish in the traditional demand slack season but was normal in the traditional demand peak season, so there were dramatic differences in downstream replenishment. China’s LPG prices hovered around RMB 5,000/mt in Q2 2024, and the relatively high prices weighed on the downstream procurement enthusiasm. However, the bearish impacts were limited, so the decline in LPG social inventory in 2024 was slower than that in 2023. In September 2024, China’s LPG prices moved downward gradually, so downstream users purchased resources moderately. However, the overall bullish support was insufficient, so China’s LPG social inventory rose and then inched down. Most downstream users adopted wait-and-see attitudes to the further price decline.
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