China LPG Price Will Surge to Follow CP September

Saudi Aramco announced the CP September in a great advance. The propane was at USD 480/mt, up USD 60/mt from CP August, and the butane was USD 500/mt, up USD 40/mt from CP August. The long-term contracted propane CFR South China was estimated at CNY 3,710/mt, and that of the butane was at CNY 3,896/mt.

In positive expectation of the future flourishing demand, Saudi Aramco set the latest CP September far beyond market forecast, and most traders showed guarded intension on resource procurement in September. First, because the Hurricane Harvey wreak havoc in the U.S. Gulf, most refineries were shut down, and propane delivery was also blocked. The international propane supply shrank in this period, and this helped the price-making in Mid-East. Second, traders gave high offers in negotiations, and the FOB spot offers were maintained within USD 470–475/mt, giving strong support to CP September. Third, confirmed deals were less than expected in September, and some traders stood aside to seek outcomes. However, Saudi Aramco held positive expectation on September LPG market, and chose to stimulate in advance by raising CP September. Moreover, the weak US Dollars was one certain reason when Saudi Aramco made their decision.

According to SCI, the long-term contracted propane CFR South China was estimated at CNY 3,710/mt, and that of the butane was at CNY 3,896/mt. The surge of CP September had influenced the long-term contracted offers already, accordingly. Despite this, the LPG terminal listed offers still remained relatively low, temporarily.

Remarks: Offers were CFR price instead of self-delivery terms, only including 1% import tax and 11% value added tax but exclude port charges. The CNY/USD exchange rate is 6.6293 on August 29.

From the table, it is clear that the propane and butane (50%:50%) offer is within CNY 3,600–3,920/mt Maybe lower in East China and higher in South China, but the overall price level is far under the international price. According to China’s importers, the aggressive CP moves are unexpected, and most major traders consider it too radical, especially for low domestic price level. Therefore, it is predicted that the LPG terminal listed offers will surge soon to follow the CP September, and the domestic LPG price will rise by CNY 100–200/mt in a short term as estimated, and the price trend will remain upwards in September and October.