South China's wholesale residential LPG prices fell by around 13pc over 6-11 May on a rise in domestic supplies.
Supplies rose in the south China region as refineries maximised output — with LPG margins outperforming other oil products since mid-April — and plants returned from maintenance.
The Argus Pearl River Delta index was assessed at 2,711 yuan/t ($382/t) on 11 May, down by Yn430/t from 6 May. The index represents the weighted-average price of six key terminals in south China, including Dongguan Jovo, Guangzhou Huakai, Zhuhai Siamgas and Zhuhai New Ocean.
Other import terminals in south China were unable to provide discounts on wholesale prices to compete with refineries because of a rise in import prices this month.
Warmer weather slowed demand and pressured wholesale prices in south China as refineries ramped up LPG output from mid-April, a south China importer said. Import terminals now have no choice but to clear their current supplies at lower prices.
South China's Guangdong province is a major consumer of residential LPG, accounting for about a quarter of China's total residential LPG demand. China's total residential demand was at around 22.8mn t in 2019, up from 21.7mn t in 2018, according to data from China's largest refiner state-owned Sinopec.
The bulk of Guangdong's residential LPG demand is met by imports of propane-butane mix through seven major terminals, with import volumes reaching around 6mn t in 2019. A portion of the imports that arrive at the terminals goes to the petrochemical sector and to consumers outside of the province.
Domestic refineries supply around 1.2mn-1.3mn t/yr of residential LPG to Guangdong, a south China refiner said. Residential LPG supplies in south China have increased by 4,000-4,100 t/d since mid-April, mostly from major refineries in Guangdong, Guangxi and Fujian provinces.
Sinopec's 470,000 b/d Maoming refinery in Guangdong has been supplying 2,400-2,500 t/d of LPG since mid-April, almost triple from 700-800 t/d previously, as it boosts output to take advantage of favourable LPG margins. The refinery is expected to offer incremental supplies until at least the end of June.
Sinopec Maoming's joint-venture chemical plant with German petrochemical producer BASF, also in Guangdong, has been shut since mid-April because of weak demand, freeing up an additional 1,000 t/d of LPG that is usually used for its 180,000 t/yr isononyl alcohol production.
Petrochemical plants have also opted to replace their use of LPG with cheaper alternative feedstock naphtha, prompting domestic refiners to offer more LPG in the wholesale market.
Sinopec set its internal settlement price of naphtha at Yn1,370/t for May, down by Yn1,700/t from April. Sinopec usually refers to the monthly average of cfr Japan prices of naphtha to set the internal settlement price for its refining and petrochemical units.
China's state-owned PetroChina set its internal settlement price of naphtha at Yn1,000/t for May, down by Yn1,315/t from April.
Supplies on the rise
LPG supplies from domestic refineries in nearby Guangxi province have also increased.
PetroChina's 200,000 b/d Qinzhou refinery restarted at the end of April after a two-month maintenance shutdown. The refinery has supplied around 1,000 t/d of residential LPG since its restart.
Sinopec's 100,000 b/d Beihai refinery is expected to start up this week following a two-month maintenance shutdown, which is set to add another 200-300 t/d of LPG in the market. And the company's 240,000 b/d Fujian refinery in southeastern Fujian province, a joint venture with ExxonMobil and Saudi Arabia's state-owned Saudi Aramco, switched to run fully on naphtha at the end of April, releasing 200-300 t/d of imported LPG into the residential market.
Rival firm Fujian Meide's 660,000 t/yr propane dehydrogenation plant has started to sell the 44,000t of propane that it purchased at the end of April, as technical problems may delay its start-up scheduled for the second quarter. It has sold 800-900 t/d propane to the residential LPG market since the end of April.
