US-China LPG Trade Flows to Recover in September: Sources

U.S.-origin LPG cargo flows into China are expected to recover next month amid easing uncertainties among Chinese buyers following the Aug. 11 announcement of a tariff truce extension, market sources said.

The latest Vortexa data shows a reversion to traditional trade flows, with China set to regain its position as the top importer of U.S.-origin LPG in September. Of an estimated 2.34 million metric tons of U.S. LPG exports to Asia in September, China is expected to receive the largest share at 859,700 mt. This is an increase from August, when China imported 776,400 mt of U.S. LPG and ranked third after Japan and South Korea.

Before the Aug. 11 announcement, Chinese importers were hesitant to take U.S. cargoes despite an initial 90-day tariff pause, due to concerns of renewed trade tensions. As a result, the bulk of U.S. LPG flows were diverted to other Northeast Asian markets from May to August. However, Chinese sources said the additional 90-day extension has alleviated those concerns, with many buyers re-entering the spot market.

OPIS has tracked six buy tenders issued by Chinese importers since the announcement, most of which are open to U.S.-origin cargoes.

Chinese buyers are also expected to shift away from Middle Eastern supply, with imports from the region likely to drop in September. Vortexa data shows estimated arrivals of Middle Eastern LPG to China at 824,200 mt in September, down from 1.51 million mt in August.

“Some market participants believe that China will continue to get supply from the Middle East, as Middle East cargoes are now cheaper due to oversupply in the region. However, this is unlikely as U.S. cargoes are more suited for Chinese PDH usage. U.S. suppliers can offer full 46,000 mt propane cargoes, while most Middle Eastern cargoes are evenly split LPG, which are more catered for residential use,” a Chinese trader said.

Renewed Chinese demand has also pushed up LPG prices in the region. OPIS assessments show that the CFR Japan propane flat price, the reference price for Asia’s LPG, averaged $521/mt in the week of the Aug. 11 announcement, up from $507/mt the week before. Continued Chinese demand has supported prices ever since, averaging $526/mt last week and closing at $534/mt on Monday.

–Reporting by Cheryl Lee, clee@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com