Asia LPG Supply Tightens on Winter Restocking, Cargo Swaps: Sources
Asia’s LPG supply has tightened as importers ramp up buying for winter restocking and cargo swap activity, according to sources, with the market entering backwardation after several months in contango.
OPIS assessments show that the CFR Japan propane H1 January/H2 January time spread flipped to backwardation of $1.50 per metric ton on Monday. A backwardated structure, where prompt prices trade above forward months, typically reflects strong near-term demand and tighter supply.
Buying has been led mainly by Japanese and South Korean players seeking January and February 2026 cargoes for winter requirements. The buying momentum began in mid-November, when Chinese propane dehydrogenation operators started restocking, OPIS reported earlier.
Sources also said Japanese players have been actively engaging in U.S.- versus non-U.S.- origin cargo swaps. Several buyers have purchased U.S.-origin LPG to replace non-U.S. barrels in their portfolios, subsequently reselling these non-American cargoes to other Asian destinations for more profits.
“Japan could resell non-U.S. cargoes into markets like China. These cargo swaps have definitely reduced flexible spot volumes in the market,” a source said.
A South Korean cracker operator said it had entered into a cargo swap with another regional player that had secured multiple H2 January cargoes. Under the arrangement, the operator is expected to issue a tender for February-delivery cargoes, while taking in H2 January supply, the source added.
The strong buying activity has pushed up physical window premiums. “Premiums are especially elevated for first- and second-half January cargoes, marked at around the low $30s/mt above the Far East quotes, given the heavy buying interest,” a trader said. “First-half February premiums are lower, at around the mid- to high-$10s/mt.”
Tighter supply conditions have also resulted in a string of spot tender cancellations, as buyers faced difficulties securing cargoes or received offers at much higher premiums.
OPIS tracked five tender cancellations from importers seeking January 2026 delivery cargoes, including Chinese PDH operators such as China Gas and Ningbo Huatai.
CFR Japan propane flat prices began rising in mid-November as market strength emerged. Prices averaged $495/mt in the first half of November before climbing to $519/mt in the second half of the month, OPIS assessments show. Prices rose further to an average of $544/mt in H1 December.
—Reporting by Cheryl Lee, clee@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com