Shandong LPG Market Performed Well in Off-Season

In the summer of 2018, the LPG prices increased to some extent. Moreover, the increase in the civil-use gas prices was higher than that in the C4R2 prices. Up to August 2, the spread between civil-use gas prices and C4R2 prices narrowed to RMB 40/mt. In the same period of July, the spread between civil-use gas prices and C4R2 prices was about RMB 490/mt.

In 2018, the international crude oil prices increased over 50% from the same period of 2017. Supported by the greatly increased crude oil prices, the trading atmosphere in the LPG market performed well in 2018. Therefore, the LPG prices increased in the traditional off-season. In the summer of 2018, the LPG supply in Shandong was tight. In July, the independent refineries in Shandong took overhauls intensively, and the LPG supply declined accordingly. Besides, influenced by the depreciation of RMB, the costs of imported LPG continued to rise. Thus, the civil-use gas prices obviously moved up.

Currently, the bullish impacts from the slightly increased CP August weaken, so the increase in the civil-use gas prices is limited. SCI reckons that the civil-use gas prices in Shandong will hover at highs in the short term. In mid-August, the units at Shandong independent refineries will be restarted in succession, and the LPG supply will grow accordingly. Thus SCI predicts that the civil-use prices will decrease to some extent. In late August, as the civil-use gas prices will drop to low levels, downstream users may stock up. Furthermore, as most market participants adopt a bullish attitude to CP September and the LPG market will enter the traditional peak season, the civil-use gas prices will increase in August. On the whole, SCI reckons that the average civil-use gas price in August will increase by RMB 200/mt from July.