Chinese LPG Buyers Shift From Term Deals to Spot Buying
Chinese propane dehydrogenation operators have increased spot market activity for LPG cargoes, as buying interest shifts away from term supply contracts amid persistent price and policy uncertainties, industry sources said.
Several Chinese importers have issued spot tenders seeking March delivery cargoes since the start of the week. OPIS tracked six spot buy tenders from importers such as Sinobenny and Oriental Energy.
China-based sources said the rise in spot tenders reflects a broader retreat from CFR and FOB term contracts this year, with importers preferring spot purchases over long-term commitments.
“Many operators remain cautious after last year’s price volatility and tariffs due to the U.S.-China trade tensions,” a Chinese trader said. “The continued 10% tariff on U.S. LPG supply also adds uncertainty, so buying on a spot basis is viewed as less risky.”
Another trader said Saudi Aramco’s inflated contract price levels last year had further weakened appetite for term supply. “High CPs made long-term contracts unattractive, and buyers are therefore more selective this year,” the trader said.
The shift toward spot buying takes place despite tight supply conditions. LPG availability remains constrained following fog-related delays at the U.S. Gulf Coast which started late last year, with sellers still clearing delayed loadings and facing uncertainty over delivery schedules.
Vortexa data estimates U.S.-to-Asia LPG flows will fall from 3.35 million metric tons in December to around 3.01 million mt in January and 2.51 million mt in February.
“Sellers have been reluctant to commit cargoes, which has led to multiple tenders being cancelled due to a lack of offers,” a shipbroker said.
Vietnam’s Hyosung Vina, Kaohsiung-based CPC Corp. and South Korea’s Hanwha TotalEnergies Petrochemical Co. were among buyers that cancelled tenders for January and February delivery cargoes for this reason.
Tight supply has also supported higher prices. LPG flat prices averaged $560/mt so far this week, up from $548/mt last week.
Despite the price surge and tight supply, analysts said Chinese buying interest remains firm, partly also due to restocking needs amid low domestic inventories. Importers are seeking to rebuild stocks ahead of the Spring Festival holiday in February, when trading activity typically slows.
The CFR LPG flat price closed at $564/mt on Tuesday, compared with $514/mt a month earlier, OPIS assessments show.
—Reporting by Cheryl Lee, clee@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com