January CP Sees Increments
The January propane CP was $620/mt, up $10/mt M-O-M. At the same time, the January butane CP was $630/mt, up $10/mt M-O-M. The supply and demand fundamentals may be key drivers influencing China’s LPG prices, and it is predicted that China’s LPG prices will probably fluctuate downward in January 2024.
The January CP rose from December, which was largely in line with the market expectation. It is expected that the international LPG supply will probably decline in the wake of unit maintenance in the Middle East and poor transportation, supporting propane and butane CP. Moreover, the end consumption in the Northern Hemisphere is likely to increase due to the low temperature. At the same time, China’s LPG deep-processing profits will probably improve, lifting the operating rate of the deep-processing industry. Besides, it is estimated that the international crude oil prices may rebound, giving support to propane and butane CP.
As of December 29, 2023, selling prices of imported LPG in China averaged RMB 5,318/mt, up RMB 44/mt or 0.83% M-O-M. China’s LPG import arbitrage remained negative, as China’s LPG import costs rose, but the increments in selling prices of imported were limited. Influenced by the rising freight, China’s LPG import costs in December rose by RMB 150/mt from November. In December, China’s LPG import arrivals rose M-O-M, but the overall downstream demand was lower than expected, weighing down selling prices of imported LPG.
Supported by the increment in import costs, most sellers may intend to maintain high prices. Moreover, most downstream users replenish stocks after the New Year’s Day holiday, supporting China’s LPG prices in the short term. Considering the Spring Festival holiday, most sellers intend to cut inventory before the holiday, and some enterprises may have holidays in advance. Accordingly, the overall end consumption may remain largely unchanged, weighing on China’s LPG market. China’s LPG supply is likely to rally in January, and China’s LPG import arrivals may go up. Overall, it is estimated that China’s LPG prices will probably fluctuate downward in the long term.
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