China LPG Inventory to Ramp up
China’s LPG inventory at refinery rose in September, and the LPG port inventory went down. Both China’s domestic LPG output and imported LPG supply rose, but the LPG downstream demand saw different performances. Accordingly, there were different changes in China’s LPG inventory. In the short term, it is predicted that China’s LPG supply may remain high, but the demand for LPG from industrial-use gas and civil-use gas markets may see minor improvements. Therefore, it is estimated that China’s LPG inventory will probably rally.
As of September 30, 2023, the monthly average level of LPG inventory at refinery reached 33.84%, up 3.74% M-O-M. According to SCI’s data, the LPG inventory at refinery was 34.64% at the end of September, up 3.14% from the beginning of September. China’s LPG commercial volume in September was 1,613.5kt, up 9.6kt M-O-M and lifting the LPG inventory at refinery. In terms the demand for LPG, the overall LPG demand recovered slowly in September. Although the international crude oil and LPG prices increased, the end consumption saw minor improvements, as most downstream users maintained just-needed procurement.
As of September 28, China’s LPG port inventory averaged 54.46%, down 2.92% M-O-M. According to SCI’s shipment data, China’s LPG import arrivals totaled 2,766kt in September, up 46kt M-O-M. Meanwhile, the improvement in demand for LPG from the industrial-use gas market was lower than expected. Taking the PDH market as an example, PDH unit profits remained negative, so the monthly average PDH unit operating rate was lower than 70%, dragging down the consumption of imported propane. However, the overall consumption of imported LPG was fairish in the wake of traditional demand peak season and downstream replenishment before the Mid-Autumn Festival and the National Day holidays.
Inventory is influenced by supply and demand fundamentals, market sentiment, crude oil, etc., and inventory exerts impacts on prices. The overall LPG supply and demand will probably improve in October, and the international crude oil prices are likely to decline from high levels, weighing on the market sentiment.
Some units at Sinopec Guangzhou Company may take overhauls from mid-October, and units at Sinopec Zhanjiang Dongxing Petrochemical will probably be shut down for maintenance in early October. Zhejiang Petroleum & Chemical cut its LPG sales, and Fujian Refining & Petrochemical arranged all LPG resources for captive-use. Besides, units at Henan Fengli Petrochemical may be restarted, and other units are likely to run steadily. Overall, it is estimated that China’s LPG commercial volume may inch down and reach about 1,500kt in November. Moreover, it is estimated that the overall LPG import arrivals will probably be high and reach about 2,900kt in October
With the temperature declining, the end consumption of LPG will probably go up, lifting the downstream procurement. However, the overall operating rate of LPG deep-processing industry may decline due to sluggish profits.
Overall, both LPG supply and demand will probably rise in October. Therein, profits of alkane and olefin deep-processing industries may underperform, and the international crude oil prices are likely to go down. Accordingly, it is predicted that the demand for industrial-use LPG may weaken somewhat, and China’s LPG inventory at refinery will probably rise. In terms of LPG port inventory, SCI reckons that China’s LPG port inventory may go up, as China’s LPG import volume will probably remain high, but the overall industrial-use LPG demand is likely to see limited improvements.
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