China Propane Market Brief Summary Q3 2017

According to SCI, China’s propane quarterly averaged price in Q3 2017 was RMB 3,747/mt, down RMB 130/mt or 3.35% from Q2 2017 which averaged at RMB 3,877/mt. 

As showed in the chart above, on the one hand, the price level of propane in Q3 2017 was obviously higher than that in last year. The quarterly averaged price in Q3 2017 was RMB 3,747/mt, up RMB 846/mt or 29.16% from Q3 2016 which averaged at RMB 2,901/mt. On the other hand, the propane price run a firm ladder-like upward tendency in Q3 2017. It leveled off from touching bottom at late June, and then it had bottomed out from late July till the end of the quarter.

As for the year over year comparison, tracing the cause of the high price level of China propane in Q3 2017, the main reasons lay in the influences of the international crude oil and the supply-demand counterbalance. First, the international crude oil acted different in the same quarters of 2016 and 2017. In Q3 2016, the international crude oil market was bearish, embroiling the propane in turbulence. However, in the same quarter of 2017, the international crude oil market had been rebounded under the support from the OPEC’s production cut, geopolitics crises and other positive stimulators. Second, China’s domestic propane supply shrank noticeably from 5,029mt/day in Q3 2016 to 4,658mt/day in Q3 2017. This was mostly because Shandong Dongming Petrochemical turned its propane product as self-use, and Sinopec Qingdao Refining & Chemical did so too. Comparing with the shrinking supply, the downstream demand was relatively stable, resulting in a major fundamentally support to the propane price.

As for the quarter over quarter comparison, China’s propane price topped in Q1 2017 for winter heating reasons, and then it kept dropping in Q2 2017 and touched the bottom in late June. Then it underwent a dramatically uprising. At the end of the quarter, it unusually evened out across the same level of conventional winter season.

Those two totally different tendencies in Q2 and Q3 2017 were mostly because of the international crude oil and the strong CP trends from Q3 2017. The WTI rose from USD 44/bbl in July to USD 50/bbl in September, and Saudi Aramco’s CP also kept rising from July to October. Both of those prices together pushed up the propane import price in China, accordingly. Besides, as the temperature drops, the peak-off season had passed. Along with the accelerated downstream civil-use gas consumption, the replenishment cycles became shorter, and the market activities were fully motivated.

In conclusion, the advanced rebound in Q3 2017 reveals a foreseeable significant peak season in the upcoming winter for propane market. In a short term, right after the National Day and Mid-Autumn holidays, it is inevitable that an intensive replenishment peak is about to dawn. With the high starting price level, the recovering winter heating demand and the moderate PDH development, China’s LPG market is established with a flourishing winter beyond all doubt.