Chinese Retaliation Fears Linger in Asia’s LPG Market Amid Expanded Sanctions on Iran
Asian LPG market participants have raised concerns over potential retaliation from Beijing following Washington’s expansion of sanctions on Iran, given China’s role as a key buyer of Iranian LPG.
The U.S. Department of the Treasury on Monday announced Operation Economic Outcast, a campaign to economically isolate Iran. This sees sanctions on around 60 individuals, entities and vessels, with measures targeting sectors such as digital assets, technology, gold, aviation and shipping.
The announcement also specifies a grace period for countries to sever ties with Iran or risk facing secondary sanctions.
The move comes shortly after the U.S.-Iran memorandum of understanding aimed at stopping the war expired last Monday without a deal being reached between the two countries.
Sources said the market is not concerned that the sanctions will lead to a shortage of Iranian LPG supply across Asia, as China is the main Asian buyer of the gas. Instead, the key concern is potential retaliation from China, which could have broader implications for Asia’s LPG trade.
“There are fears that China will shoot back with retaliatory tariffs and U.S.-China tensions will escalate again, something similar to the 2025 trade war,” a Chinese trader said.
Chinese importers are concerned that a renewed tariff dispute could disrupt current U.S. LPG trade flows into the country, with the propane dehydrogenation sector relying heavily on U.S. supply following reduced Middle East cargoes since the Iran war began in late February.
Vortexa data shows that the U.S. was the top supplier of LPG to China from the start of the year through August, at an estimated 7.55 million metric tons, accounting for 39.3% of total imports of 19.21 million mt. Iran was the second-largest supplier at 3.88 million mt, accounting for 20.2% of total imports.
Chinese sources also pointed out that finding alternative supply could be more difficult if China retaliates, with Middle East supply cut because of the war.
China typically imports around 2.5 million to 3 million mt of LPG a month, while Iranian imports have not reached 1 million mt/month, meaning Iranian supply alone would not be sufficient to replace U.S. volumes, sources added.
However, analysts also noted that a repeat of 2025 — when reduced Chinese demand led to a significant drop in Asian LPG prices — may be less likely, as India, another major market, is now also receiving more U.S. supply following the disruption to Middle East cargoes.
“The region therefore has more demand to absorb U.S. volumes displaced from China if retaliatory tariffs are imposed,” one analyst said.
The CFR Japan flat price was assessed at $790.50/mt on Monday, up from $776/mt the previous month, OPIS data shows.
–Reporting by clee@opisnet.com; Editing by mwong@opisnet.com