Viewpoint: Petchems keep driving US LPG exports to Asia

Market: LPG
23/12/21

US exports of LPG into Asia are expected to continue to grow in 2022 as ongoing petrochemical demand in the region bolsters demand for US feedstocks, particularly propane.

The US continued to ship more than twice the volumes of LPG to Asia versus Europe in the second half of 2021, even as a spike in European heating demand improved the arbitrage to the region early in the fourth quarter.

US LPG exports to Europe in September, October and November totaled 2.16mn tonnes (t), or about 295,000 b/d assuming mostly propane, according to oil tracking analytics firm Vortexa, down from 2.3mn t during the same period of 2020. In contrast, exports into Asia continued to account for the lion's share of US export demand in the same three month period at 7.1mn t (969,735 b/d assuming mostly propane), up from 6.69mn t during the same months in 2020.

US export volumes rose as the arbitrage to both Asia and Europe widened sharply after propane prices at Mont Belvieu, Texas, retreated from prices in October that hit seven-year highs on low inventory concerns.

US Gulf coast fob propane prices stood as low as a $189/t discount to delivered prices on the Argus Far East Index on 17 November, the widest discount versus the FEI since the end of January 2021 when concerns over heating fuel supplies in parts of Asia pushed delivered propane prices higher.

The wide differential in mid-November followed strong pre-buying of LPG cargoes ahead of winter demand in Asia in early November, even as US buying interest waned late in the fourth quarter. US LPG retailers, concerned over historically low propane inventories, pre-purchased needed volumes for the domestic heating season in September and October, and by November had largely left the spot market, leaving US propane at Mont Belvieu comparatively weak to the international market. US propane inventories remained 16pc below year-ago levels at the start of December, according to the US Energy Information Administration (EIA).

Discussions for spot-loading propane cargoes out of the US Gulf coast hit a 2021 high of 9¢/USG over Mont Belvieu EPC propane in mid-November discussions, as Asia demand picked up. Prices subsequently retreated to as low as near a 5¢/USG premium as term LPG buyers appeared well supplied and uncertainty over freight delays left traders unwilling to purchase incremental cargoes, despite the wider arbitrage on paper.

By Amy Strahan

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