Viewpoints 2021: LPG

Author Reza Amanat, Editor, LPG

LPG weathered the Covid-19 pandemic in 2020 better than other hydrocarbons, thanks in large part to its diverse usage. The year was also saw substantial growth in LPG infrastructure in both producing and consuming regions, which will be vital going forward.

LPG demand witnessed dramatic twists and turns in 2020, as the Covid-19 pandemic and the resulting lockdowns ate away at usage in some sectors while boosting consumption in others. But demand for the fuel proved resilient, supported by the start-up of new LPG fed petrochemical projects in Asia-Pacific and healthy olefin margins. LPG supplies were less dramatically impacted by the pandemic. US exports grew with the help of addition export infrastructure, lower than expected butane demand for winter specification gasoline and high inventories in the US midcontinent. The growing supplies from the US contributed to delays on the Panama Canal and higher tonne-miles for the VLGC fleet, which in turn boosted freight rates to five-year highs, eroding the economics of LPG trade between US and Asia-Pacific. The high long-haul freight rates put alternative supplies from the Mideast Gulf in focus for many Asian buyers. One Mideast Gulf producer, Iran, will be hoping last year’s US elections and the resulting changing of guard at the White House will lead to some sanctions relief, opening the way for the investment needed to double its exports to 16.5mn t/yr.

Viewpoints

US to Asia-Pacific arbitrage key for VLGC
Arbitrage economics between the US and the Asia-Pacific region must remain attractive to support Very large gas carriers (VLGCs) freight rates at the higher levels recorded in the fourth quarter of this year. By Aidan Lea.

US butane backwardated into 2021
Lower US butane inventories seen at the start of the fourth quarter are keeping Mont Belvieu, Texas, butane steeply backwardated into 2021. By Kelly Strickland and Yulia Golub.

US propane production to recover in 2021 
US propane production is expected to grow in 2021 as crude and natural gas output begins to recover from Covid-19-related shut-ins while overseas demand remains strong. By Marialuisa Rincon and Yulia Golub.

NYH gasoline shortage may linger in 2021
New York Harbor prompt gasoline shortages may persist this winter amid poor blend margins and weak domestic arbitrage economics, yet imports will fill part of the supply gap. By Stephanie Crawford.

NWE propane tightness to cap petchem demand
A winter of reduced propane demand from the northwest European petrochemical sector is a pre-shale boom throwback that some early-career traders may not yet have witnessed. But this scenario is likely, after a sustained run of relative propane price strength versus competing feedstock naphtha saw plans for the flexible portions of local cracker slates reshuffled. By Peter Wilton.

Geopolitics drive Iran’s LPG potential
The inauguration of new US president Joe Biden later this month is likely to set in motion shifts in US foreign policy, with significant repercussions for LPG markets. Biden's team is expected to rethink US-Iran relations, a policy item that may have important long-term consequences for global LPG supplies. By Reza Amanat and China staff.

Petchem demand to drive China’s LPG imports 
China's expanding petrochemical sector is expected to boost the country's LPG import demand in 2021, helping to offset a contraction in LPG imports from the wholesale sector over the last year as a result of the Covid-19 pandemic.

Asian ethylene sector braces for new supply
The Asian ethylene market is preparing for a challenging year, with 11 ethylene crackers expected to come on line in 2021 — eight in China, two in South Korea and one in southeast Asia. But new derivative capacity may keep merchant ethylene supply balanced.

Updated Argus LPG Analytics service
With comprehensive coverage of LPG supply, demand and trade, the recently upgraded analytics platform provides users access to Argus’ full set of LPG fundamentals data, updated quarterly.
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