LPG: View of the markets - March edition
Asia & Middle East
Global Propane Prices
Asian delivered propane prices fell by 1.7% in February, lagging behind the heavy losses in the front-month Brent contract, which shed 4.5% over the same period. Steady import demand from China, owing to favorable production margins, supported propane prices.
Spot sales of 46,000 tonnes of propane for March delivery to East China were mostly achieved at $15/tonne against the March Argus Far East Index (AFEI), even as 23,000 tonnes of propane for second-half March delivery to Chiba traded lower, underscoring strong demand from China.
LPG versus Naphtha
Saudi Aramco Posted Propane & Butane CP
Ample supply in March from regional producers was met by slowing demand from India. Spot sales on evenly split ratio cargoes loading in March were concluded at a $25-30/tonne discount to the March CP.
Chinese PDH Performance
Run rates at Chinese PDH plants averaged 73% in February, largely stable from the previous month, even as capacity grew with the startup of two new units by Guoheng Chemical and Wanhua Chemical.
Global LPG prices and key indexes, news and expert analysis | Argus Media
Europe
- Northwest European propane buyers struggled to secure product in February owing to declining US LPG exports and depressed local supply. This has driven northwest European large cargo propane premiums to underlying front-months swaps — a key indicator of spot market tightness — to a five-month highs.
- The premium increased to $27.50/t on 26 February from $7.50/t at the month’s start as persistent public demand for large cargoes — international seaborne product delivered to the hub in 20,500t or 22,400t parcels — met scant supply, exposing a substantial gap in availability across mid- to late-March dates.
- The closure of transatlantic arbitrage in mid-February reduced US LPG exports to the region by 30pc month-on-month to 574,000t, according to Kpler. Local supply from the North Sea was also depressed owing to high natural gas, which averaged a $158/t premium to large cargo propane, encouraging upstream producers to retain LPG within natural gas streams. Loadings from key North Sea supply outlets slid by 20pc to 246,000t, the lowest level since October.
Global LPG prices and key indexes, news and expert analysis | Argus Media
- Scant supply met firming demand as petrochemical consumption of propane benefited from improving cracking economics. The competing feedstock naphtha surged on the back of curtailed refinery output and early shift to summer-grade gasoline production, widening the spread between the two to -$84/t from -$68.50/t in January. This coincided with a heating demand boost following a mid-February cold snap, with minimum temperatures dropping 4-5°C below the seasonal average.
Americas
US propane inventories fell to 48.65mn bl at the end of February, according to the US Energy Information Administration (EIA), leaving stocks 4pc below the five-year average and at the lowest weekly figure since May of 2022.
Lower inventories came as US propane exports averaged 1.8mn b/d in February, versus 1.76mn b/d last year, as terminal operators run near capacity. Weekly shipments slumped in the third week of February owing to fog delays out of Gulf coast ports, which left operators working to catch up.
Overall, US propane prices at Mont Belvieu, Texas, remain well-supported by export demand. Propane’s value relative to Nymex WTI averaged 54.6pc in February, up sharply from 49.4pc of crude last year, as LPG was less impacted by trade concerns that weighed on crude in the latter half of the month.
So far President Trump’s 10pc tariff on Canadian energy imports, which went into effect March 4 and include propane, have yet to result in lower prices in western Canada, which relies on exports to the US to help balance an oversupplied domestic market. Observers expect the tariffs to pressure Canadian prices lower in order to keep shipments southward flowing, as Canada’s export terminals on the Pacific coast are already running near capacity.
Edmonton, Alberta, in-well propane averaged a 26¢/USG discount to LST propane at Mont Belvieu, Texas, in February, slightly stronger than the average 32.7¢/USG seen a year ago.
Market participants in Canada who usually negotiate term offtake agreements in March for the coming winter are more hesitant to wrap up business this year as they try to determine whether they will see another reprieve on US tariffs as they did at the start of February. In the meantime, spot buyers are sitting on the sidelines waiting for clearer direction as supplies are ample.
Outlook
The quarter ahead
- Elastic petrochemical demand has shielded LPG from volatility in the broader energy and geopolitical sectors
- The current set of tariffs between China and the US are unlikely to significantly impact LPG directly, but further escalation is still possible
- Destocking and economic uncertainty has kept petrochemical demand muted
The next 6 months and longer term
- Though winter heating demand in the US has taken pressure off export capacity, we expect the terminal market to remain tight until the arrival of the Nederland expansion in 2H25
- The tariffs implemented by the US will slow Chinese economic growth, and hence downstream petrochemical demand, slightly in 2026 and 2027. But the recovery of the domestic real estate market will be the larger factor in LPG demand over the coming years
- We expect Middle East LPG production to accelerate towards the end of 2025 and for the rest of the forecast period
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