'Almost' perfect storm hits LPG prices

: LPG
21/09/28

An "almost" perfect storm of factors in Europe is behind the supply squeeze that has seen LPG prices move to multi-year highs, Argus' vice president LPG, David Appleton, told delegates at Liquid Gas Europe's European LPG Congress today.

Propane prices cif Amsterdam-Rotterdam-Antwerp (ARA) have gained around $250/t since 1 June to $778/t yesterday, and butane prices are up by around $240/t over the same time at $753/t, each marking the highest since 2014.

Appleton said the squeeze is a result of a combination of supply issues. Low US stock levels are limiting exports just as European buyers are looking to rebuild inventory, and any product that does leave the US is finding more attractive netbacks in Asia-Pacific. Nearer to home, low European refining rates are capping supply and this is compounded by Algerian supply disruption and ongoing steady reductions from Russia.

Appleton said he applied the "almost" caveat because the situation could soon be tempered.

"September is not February", he said. With the northern hemisphere not yet in peak heating season, much of the current upside price pressure is due to demand for stock-building, and the resultant inventories may prove sufficient as winter unfolds. This would see current prices mark a peak for this winter, given that hey largely reflect demand that has been brought forward.

Appleton said stocks are low now because of very strong demand for heating "in all three key regions" — north America, Europe and Asia-Pacific — last winter. And this has no bearing on how conditions may unfold this year, he said.

Lastly, and crucially, "consumers who swing between propane and naphtha are simply not in the market at all" as buyers, said Appleton. A lack of this discretionary buying could see prices sharply tail off if the current sole prop on the buy-side — heating demand, or heating stock-building demand — subsides.

Pivoting to a forward view, Argus' LPG consultancy principal Kristen Mueller painted a fairly bullish outlook for demand, albeit it with some downside risks highlighted.

Mueller expects demand recovery as the pressure of Covid-19 on transport and commercial markets subsides next year. Flexible petrochemical demand will return as Mueller forecasts naphtha to return to its historically-predominant premium to rival feedstock propane. Over 2022 and 2023 demand patterns will return to "a world that looks a little bit nearer to 2019," she said.

Mueller highlighted a swathe of capacity additions from new propane dehydrogenation (PDH) facilities. China provides the bulk, with seven new PDH plants due to come online in that country this year, eight next year, and nine in 2023, giving an estimated 16.2mn t/yr of additional demand. For comparison, overall European LPG demand from all sectors is forecast by Argus at around 40.25mn t this year.

With so much new forecast demand pegged on PDH plants, propane is increasingly reliant on propylene markets. Mueller highlighted that at current PDH capacity, just a 10pc drop in Chinese operating rates can instantly take 1 mn t/yr out of global LPG demand. With PDH capacity set to double on the new sites by 2023, the effect of any reduction in operating rates is going to lead to larger and larger impacts on global balances.

On the supply side, Mueller said major LPG producing regions — north America and the Middle East — will significantly, and steadily, increase output in the next five years.

By Peter Wilton

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24/11/08

Poland's Azoty ramps up PDH/PP operations at Police

Warsaw, 8 November (Argus) — Polish chemical conglomerate Grupa Azoty said it is making progress in ramping up production at its new 437,000 t/yr propane dehydrogenation (PDH) and 429,000 t/yr polypropylene (PP) complex in Police, although it needs time to stabilise output and ascertain the unit's economic feasibility. Azoty said both units are operating even though formal commissioning of the entire project has not yet been yet completed. It is in negotiations with the contractor to undertake final improvements and overcome some defects, it said. Azoty expects to agree with the contractor on final terms of commissioning by the end of this year. Since the start of its operations, the PP plant has produced more than 200,000t and sales of PP reached 60,000t in the third quarter, Azoty said. Azoty sees healthy demand for its PP products from European buyers that want to diversify their supply portfolio to reduce risk in delays to imports from Asia-Pacific. "We see end users want have at least 30pc of their (PP) supplies to come from local European supplies," said plant manager Andrzej Dawidowski. He said the company sells PP through its own distribution as well as through traders that market in Europe and elsewhere. Azoty expects to make adjustments to this model as soon as it stabilises output, which would enable buyers to determine their demand for Azoty's product. Azoty said the Police plant is yet to generate positive earnings, and it requires stable supplies of feedstock propane. It said it is working with suppliers to secure financing to ensure steady propane supplies. Azoty also said the letter of intent with Polish integrated Orlen, about a possible sale of a stake in the PDH/PP project was extended until end of 2024, giving them more time to discuss the possibility of co-operation. By Tomasz Stepien Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Gatun Lake to reach all-time high in Dec: Panama Canal

24/11/08

Gatun Lake to reach all-time high in Dec: Panama Canal

London, 8 November (Argus) — Water levels at Gatun Lake that supplies the Panama Canal will reach an all-time high in December, according to forecasts from the Panama Canal Authority (ACP). This is a significant shift from the start of the year, when water levels were at the lowest January level since 1965 following an extensive El Nino induced-drought in 2023 ( see chart ). ACP expects water levels at the lake to hit 88.9ft on 7 December and then 89ft on 18 December, which if confirmed would break the 88.85ft record registered on 5 December 2022. This time last year water levels were in an 80-82ft range, the lowest on record for the November-December months, which prompted ACP to enforce rigorous transit restrictions that sent shockwaves through LPG and other shipping markets . The change in water levels reflects the transition from El Nino to La Nina, which typically brings more rainfall to Panama. Higher water levels from the onset of the rainy season in May allowed the ACP to gradually lift transits back to full capacity by August . This has helped keep auction prices for transits at the larger Neopanamax locks near initial $100,000 bidding levels — and even outpace demand, with many slots turned away without receiving any bids . Argus ' average weekly auction prices have ranged from $112,900 to $209,389 since July, settling at $136,750 by last week. This is a complete turnaround from a year earlier, when shippers paid as high as nearly $4mn for a single transit. On average, Neopanamax auction prices cost $2.1mn in November 2023. This probably helped support Panama Canal's profits in its financial 2024 year, to $3.45bn from $3.2bn a year earlier despite a 20pc fall in transits because of water-saving restrictions implemented. The ACP said the results reflected strategies such as the "freshwater surcharge, improved water yield through structural and operational upgrades, system enhancements for reservations and auctions, and maritime service operations." Water levels are forecast to gradually decrease again from 23 December with the start of the dry season, which usually lasts by May. By Yohanna Pinheiro Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Mexican LPG market awaits direction amid reforms

24/11/05

Mexican LPG market awaits direction amid reforms

The president has committed to continuing her predecessor's statist energy policies, adding to legislative uncertainty in the country, writes Antonio Gozain Mexico City, 5 November (Argus) — Mexico's LPG market finds itself in a holding pattern, with little change in retail pricing or policy signals from new president Claudia Sheinbaum, despite energy and judicial reforms that have stirred the country's political and investment climate. Sheinbaum has not specifically addressed the LPG market beyond promising stable retail prices since being sworn into office in October following her victory in elections in June. But she has committed to continuing former president Andres Manuel Lopez Obrador's energy policies, which included increasing the domestic LPG market share of state-owned oil company Pemex to about 65pc this year from 50pc in 2020. Private-sector companies have long handled LPG retail distribution in Mexico, but they started importing LPG after the 2014 energy reform. Pemex sold 157,000 b/d (406,000t) of LPG in September, down by 1.5pc from a year earlier, the latest data from the company show. The firm imported 83,000 b/d and produced 96,800 b/d of LPG in the same month, while private-sector companies imported 106,500 b/d, according to the energy ministry. The government's commitment to state energy control is underscored by the recent passage of constitutional reforms aimed at removing Pemex and state-owned utility CFE's definition as "productive state companies", freeing them from the obligation of seeking profit. The energy reform, already approved by congress, could allow the government to provide more direct support to Pemex or guarantee larger debts, of which Pemex currently holds around $95.5bn. The continuation of Lopez Obrador's statist policies, intended to make Mexico self-sufficient in terms of gasoline and diesel production, is expected to harm market competition. Adding to the uncertainty for the LPG sector, legislators are likely to approve a bill to dissolve Mexico's independent regulators, including the competition watchdog Cofece and energy regulator the CRE, which oversees fuel and LPG market permits. This would centralise regulatory authority under the energy ministry. The CRE has been in charge of LPG retail price controls since their reintroduction in 2021 to protect residential consumers from price spikes. It is unclear if the energy ministry will set price caps if the CRE is dissolved, given concerns that it could weaken Mexico's standing in the 2026 review of the US-Mexico-Canada Agreement, as the US and Canada may see it as a threat to their interests. Another reform that has impacted Mexico's investment climate during Sheinbaum's first month is the judicial bill. Mexico will now elect more than 1,600 judges, magistrates and supreme court justices between 2025 and 2027, a process critics claim would favour candidates aligned with the executive and congress. Meanwhile, the market's long-standing issue with theft has sharply declined. Illegal taps on Pemex's LPG pipelines fell by 67pc to 698 over January-August from 2,102 a year earlier, according to a Pemex transparency response to an Argus request. The volumes of stolen LPG were not disclosed. The fall in illegal tapping was mainly driven by the government's push to secure Pemex's 1,600km Cactus-Guadalajara LPG pipeline, market participants say. Gas Welfare state The suspension of operations at state-owned LPG retailer Gas Bienestar — which translates to Gas Welfare — in November 2022 reflects some of the challenges for the government in expanding LPG access through state-run schemes. Touted as a solution to provide LPG to low-income households, sales did not expand as anticipated and the firm was "paused" until resuming operations last year. The company refused to disclose its financial statements in July following a transparency request but confirmed it operates in nine of Mexico City's 16 municipalities. This has not stopped government support, as Pemex received 300mn pesos ($15mn) for Gas Bienestar's LPG distribution units in the third quarter, according to company data. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Polish LPG market braces for Russian import ban

24/11/05

Polish LPG market braces for Russian import ban

The industry hopes to avoid shortages caused by logistical bottlenecks, but fears the long-term impact of the embargo, writes Waldemar Jaszczyk London, 5 November (Argus) — A sober mood has taken hold of the Polish LPG industry as it grapples with the ramifications of losing its largest supplier, with the EU's ban on imports of Russian LPG fast approaching. The first point of call for buyers are the country's three Baltic Sea terminals, which have been responsible for the bulk of the recent drive to diversify supply. Seaborne LPG imports to Poland reached a record high of 1mn t in 2023, up by more than half from pre-Ukraine war levels. Next year, the terminals could increase intake to more than 1.2mn t/yr, Polish distributor Gaspol's public affairs manager Mateusz Kedzierski says. The company owns the country's largest seaborne terminal, the 900,000 t/yr Gdansk facility, and ended purchases from Russia in 2022. Imports will be boosted by the expansion of Polish refiner Orlen's Szczecin terminal to 400,000 t/yr from 250,000 t/yr. But the facility, still under renovation, has only recently begun operating on a part-time basis and will not reach capacity until the second quarter of 2025, an industry executive says. Other distributors are rushing to secure access to the only remaining depot — the 420,000 t/yr Gdynia terminal — with its operator, Alpetrol, recently signing long-term transloading contracts with domestic LPG companies Barter and Polski Gaz. Importers hope to avoid the logistical issues that haunted the market in 2022 when LPG struggled for rail access to the ports that prioritised coal. Kedzierski says product shortages are not expected following the embargo. Securing rail supplies from the Amsterdam-Rotterdam-Antwerp (ARA) hub may be trickier. The German railway network is less congested now owing to a stagnating economy and declines in manufacturing, but any substantial increase in usage will affect the Polish market's logistics, Polish LPG association PIGP president Pawel Bielski says. A €40bn ($43bn) maintenance and modernisation programme being undertaken by state-owned rail operator Deutsche Bahn (DB) will also weigh heavily on rail network availability for Polish importers. Only recently, two out of six rail border crossings with Germany were blocked for a week after a train derailment at one coincided with the launch of modernisation works at the other. Go west The availability of LPG railcars in Poland has improved markedly, with market participants expanding their fleets in preparation for the shift west. But this was achieved through renovation of old railcars to make them suitable for western routes, with logistics companies cutting investment in new vehicles given the uncertain future of fossil fuels in Europe, tanks producer Chemet's vice-president Piotr Frycz says. This availability might not last long as rail imports from northwest Europe could more than double to almost 1mn t/yr after the embargo, requiring anywhere between 384 and 588 additional LPG railcars, Rail Cargo Logistics sales manager Piotr Ulko says. Higher demand will increase logistical costs for ARA rail transit by at least 10pc, according to an importer. Another problem is that propane-butane mix, a key import from Russia needed for autogas, is not commonly sold in northwest Europe. But the main challenge remains the lack of alternative inland import infrastructure to the rail terminals on Poland's eastern border. The only project under way is Barter's 400,000 t/yr rail terminal in Slawkow, due to start up in the first quarter of 2025. Interest has emerged in developing "pocket terminals" with 2,000-10,000t capacities that only take 9-12 months to construct, Frycz says. Chemet recently completed one such project in Norway and is in talks with a few parties in Poland, but no final decisions have been made. Delays in processing environmental permits from local authorities continue to stall progress despite the government's promise to simplify procedures. The shift to imports from northwest Europe will inevitably result in higher domestic prices, with Poland's 2mn t/yr autogas market likely to bear the brunt. Propane-butane mix railcar prices on the border with Belarus averaged $488/t daf Brest in January-October — more than $135/t cheaper than ARA railcars. The market has already had a taste of the future after Russian LPG rail imports shrunk by almost 25pc on the year to 150,000t in the third quarter. Poor domestic demand partially offset the drop, but autogas prices still firmed to a six-month high. The impact on demand is uncertain. Autogas prices are historically low against other fuels, and even a rise to a 60pc price ratio to gasoline from 46pc in 2023 will not affect demand, Kedzierski says. Others have longer-term fears, with the industry risking an outflow of new clients converting vehicles to LPG, given lower competitiveness. The full impact of the embargo may not be felt until 2027, Bielski says. Poland sea LPG imports by origin Poland LPG infrastructure Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Nigeria bans LPG exports to lift supply and cut prices

24/11/05

Nigeria bans LPG exports to lift supply and cut prices

Abuja's ban on LPG exports seeks to stabilise domestic prices as retail cylinder costs continue to rise, writes Adebiyi Olusolape Lagos, 5 November (Argus) — Nigeria has imposed a ban on exports of its LPG unless sellers cover these with "cost-reflective" imports from 1 November, under new policies aimed at stabilising prices and increasing availability of cooking gas. State-owned oil firm NNPC and domestic LPG producers "must halt exports of LPG produced in-country or import equivalent volumes at cost-reflective prices" from 1 November, natural gas minister Ekperikpe Ekpo said on 22 October. Nigeria's petroleum regulator NMDPRA will "within 90 days" lead the creation of an LPG pricing framework that is based "on the cost of local production rather than external market indices like those from the Americas or Asia", Ekpo said. The local pricing framework will have a more general application once it is created, but it is particularly aimed at ensuring imported LPG is cheaper than it would be from either the "Argus West Africa (WAF) netback index, the Mont Belvieu index or the Platts index" should producers choose to continue exporting, a government source says. Nigeria's LPG market continues to expand but growth has "plateaued a bit within the past two years, specifically this year", largely owing to rising prices, NNPC retail commercial director Lilian Ikokwu says. LPG costs rose by 80pc over January-September, she says. Retail prices for 12.5kg cylinders of LPG for cooking increased by 39pc over January-September, while prices in September were 76pc higher than a year earlier, data from Nigeria's National Bureau of Statistics show. Nigeria's government exempted LPG from value-added tax earlier in the year but Ekpo says "previous efforts" have failed to address "price increases and the hardship they bring to Nigerians". The country will also develop facilities to "blend, store, and deliver LPG domestically within 12 months", according to Ekpo. These blending facilities are targeted at NNPC and Chevron's joint venture, which produces an LPG mix that is unsuitable for the domestic market and is exported from the Escravos floating, storage and offloading facility in the western Niger delta, a government source says. Blending the Escravos LPG mix to make it suitable for cooking use has been successfully trialled but the political will to enforce it has until now been lacking, according to an industry source. NNPC has exported six cargoes of the Escravos LPG mix this year, with cargo sizes averaging 24,000t, a company source says — exports from Escavros stand at 181,000t in January-October, according to Kpler. Nigeria also exports propane from NNPC and ExxonMobil's Bonny River terminal, but all four butane cargoes from the terminal, averaging 8,000t apiece, have been delivered domestically, the source says. And propane is exported from NLNG's Bonny Island terminal, standing at about 134,000t in January-October, Kpler data show, with all butane sold domestically. "All LPG exports will cease until the [domestic] market achieves stability and sufficiency," Ekpo says. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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