Aug China LPG Import Arbitrage to Reach High Levels
According to SCI’s data, China’s average LPG import arbitrage was RMB 184/mt in July, up RMB 356/mt M-O-M. In mid-July, China’s LPG import arbitrage became positive and gradually enlarged. Selling prices of imported LPG bottomed out in July, backed by the decline in import arrivals, downstream demand improvement and rising international crude oil prices. Meanwhile, China’s LPG import costs went down. Therefore, China’s LPG import arbitrage became positive and performed well in July. Entering August, China’s LPG import costs went up, but most market participants adopted bullish attitudes to LPG demand. Accordingly, it is estimated that China’s LPG import arbitrage may still perform well in August.
The international crude oil and LPG prices fluctuated upward, supporting the market sentiment.
The international crude oil prices fluctuated upward and saw relatively notable increments in July. In terms of the international LPG market, the overall LPG supply in the Middle East was not high, and most market participants adopted bullish attitudes to LPG demand. Therein, the demand for civil-use gas in the northern hemisphere may improve dramatically, and it is estimated that China’s industrial-use LPG demand may strengthen. The international LPG prices fluctuated upward, and market participants adopted bullish attitudes to propane CP. Accordingly, the overall market sentiment performed well.
China’s LPG import arbitrage kept enlarging with supply decline and demand improvement.
According to GACC, China’s LPG import volume totaled 3,246.1kt in July, down 1.67% M-O-M, mainly backed by the downstream demand improvement. PDH unit profits were fairish in July, so importers preferentially arranged imported resources for deep-processing units, dragging down the commercial volume of imported LPG. Moreover, market participants adopted bullish attitudes to civil-use gas demand, so most downstream users intended to stock up at low prices. Accordingly, China’s LPG port inventory declined somewhat. Given the supply decline and demand improvement, China’s LPG import arbitrage rose gradually in H2 July.
It is estimated that China’s LPG import arbitrage may still perform well in August.
Influenced by the increments in propane and butane CP, China’s LPG import costs in August rose by about RMB 700/mt from July. It is predicted that China’s LPG import arrivals in August may decline M-O-M, and most market participants adopt bullish attitudes to downstream demand with the approach of the traditional demand peak season. Therefore, China’s LPG supply is likely to become tighter. Although China’s LPG import costs may further rally, SCI reckons that China’s LPG import arbitrage is likely to hover at a high level in August, as selling prices of imported LPG may go up with tight supply and favorable demand.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
Please click "Read more" for the full article.
