Supply Side: China LPG S&D Balance Changes
China’s LPG commercial volume declined gradually, and in some areas the supply was slightly tight. As some refineries may complete the unit maintenance in May 2024, plus the LPG import volume may be ample, there may be some changes in terms of LPG supply-demand balance.
China’s LPG commercial volume declined in April 2024. As of April 25, China’s LPG commercial volume (propane and butane were not included) decreased to 52kt per day, down 4kt per day from the end of March 2024, and the commercial volume almost decreased to the same level in the same period of 2023. As of H2 April 2024, China’s LPG average commercial volume already fell below the yearly average commercial volume in 2023, 53.1kt.
As we analyzed in the focus Mid-Mar China LPG S&D Balance to See Changes, China’s LPG supply and demand may see changes from H2 March 2024. Just as we estimated, from H2 March, China’s LPG commercial volume declined gradually, and the producers’ sales pressure was released accordingly.
China’s LPG commercial volume declined gradually. On one hand, the refinery maintenance increased, with several refineries taking overhauls in Northeast China and East China. On the other hand, the naphtha price was much higher than that of LPG for a long time, so many refineries used LPG to produce ethylene. The decline in LPG commercial volume also lifted LPG prices, even though the market was entering the slack season. As of April 23, China’s civil-use LPG price was RMB 5,068/mt, up RMB 264/mt or 5.49% from the end of March.
Although China’s civil-use LPG prices increased resulting from the decreased LPG commercial volume and high crude oil prices, the growth was obviously lower than that of C4R2, mainly because of the ample LPG import volume and tepid civil-use demand.
China’s LPG import volume exceeded 3,000kt per month from March 2024, and the volume was highly likely to maintain above that level from April to June. The profits of ethylene and PDH units were favorable and supported the market demand, which also affected the LPG import. However, the ample imported LPG supply may suppress China’s LPG market.
In terms of the spread between the price of LPG produced in South China and imported LPG selling prices, the prices of LPG produced in South China were slightly higher than imported LPG selling prices. From March to April 2024, the spread between the price of LPG produced in South China and imported LPG selling prices swiftly narrowed, and some of the prices of LPG produced in East China were even higher than those of imported LPG.
There may be overhauls at some refineries from the end of April to the beginning of May. From May 2024, there may be fewer overhauls at refineries, and the previous maintenance may gradually resume. What’s more, the LPG import volume may still be high in May and June. In terms of demand, although the chemical demand for LPG may increase, it may be still inhibited as the profit of PDH units may underperform. Moreover, the civil-use demand may be sluggish in summer. Thus, it is estimated that China’s LPG supply-demand balance may change again in May 2024.
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