The industry hopes to avoid shortages caused by logistical bottlenecks, but fears the long-term impact of the embargo, writes Waldemar Jaszczyk
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.
