Asia’s LPG Market Slows Further on Price Increase, Continued Uncertainty
Asia’s LPG market activity has slowed even further this week, as non-Chinese importers retreat in response to rising prices and persistent uncertainty following the inconclusive U.S.-China trade talks in Stockholm, trade sources said.
Buying interest began tapering off last week as market participants grew increasingly cautious ahead of the Aug. 1 deadline — by which several countries must reach trade agreements with the U.S. or face the reimposition of tariffs, as OPIS reported earlier. This followed a brief buying spree in mid-July, when non-Chinese importers rushed to secure spot cargoes after U.S. President Donald Trump announced sweeping new tariffs on 14 countries.
Demand softened further this week as rising LPG prices tracked gains in crude oil, with only two buy tenders from non-Chinese Asian importers issued so far, sources said. OPIS assessments show the CFR Japan flat price rose to $517 per metric ton on Wednesday, up from $487/mt the previous week.
Middle Eastern cargoes — historically priced higher — have now become cheaper than those from the U.S., as Indian demand slows with the onset of the monsoon season. Non-Chinese importers, such as South Korea and Japan — already struggling with thin margins and weak demand — are pulling back further under the weight of higher prices, analysts said. The August Far East quotes to Saudi contract price spread flipped to $5/mt on Wednesday, from minus $42.50/mt a month ago, when Middle Eastern cargoes were significantly more expensive, OPIS data shows.
At the same time, market sentiment remains uncertain following the U.S.-China talks with no clear outcome in sight, with buyers now waiting for Trump’s final decision on whether to extend the tariff truce. Many have adopted the wait-and-see approach once again, retreating to the sidelines and seeking more clarity before returning to the market.
The sustained demand lull has placed further downward pressure on the second-half CFR Japan August prices, widening the contango on the front half-month CFR Japan spread (first-half August/ H1 September) from an average of $19.70/mt last week to close at $31/mt by Wednesday, according to OPIS data.
Some market participants noted that non-Chinese Asian buyers may consider shifting to Middle Eastern supply if prices remain favorable. However, concerns are mounting over a potential shortage, as China — currently restocking — continues to take up a significant share of Middle Eastern volumes. India’s demand is also projected to rebound by the end of the third quarter, with the start of the festive season.
“Right now, China is absorbing most of the Middle Eastern supply to fuel its propane dehydrogenation sector. As the region’s largest importer, China will likely remain the priority for Middle Eastern producers. That makes it difficult for non-Chinese buyers to pivot, and many may just continue to stay out of the market,” an analyst said.
Vortexa data shows China took the largest share of Middle Eastern cargoes in July, at around 40%, with arrivals totalling 1.95 million mt. That trend is expected to hold in August, with shipments to China projected at 1.04 million mt, according to the same data.
“Everyone is just waiting for a definitive outcome from the U.S.-China talks. Without that, importers will stay cautious and market activity is likely to remain quiet,” a trader said.
–Reporting by Cheryl Lee, clee@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com