The railcar premium has hit its highest this year as the market turned bullish in February, writes Waldemar Jaszczyk
Northwest European propane railcar premiums to large cargoes hit a seven-week high by mid-February, owing to declining regional temperatures and unplanned shutdowns at German refineries.
The premium of the 45t fca Amsterdam-Rotterdam-Antwerp (ARA) railcar assessment to 20,500t cif ARA large cargo prices hit $225/t on 13 February, the highest this year and up by 20pc since mid-January. The outright price stood at $775/t, down by $5/t since the start of this month, but large cargo values fell by $24.50/t to $550/t. Railcar prices slumped in early 2025 owing to high stocks and weaker than expected demand from central and eastern Europe. But sentiment has turned bullish as inland heating demand has firmed on colder weather and diminishing stocks. Meteorological agencies forecast temperatures in the Netherlands and Germany to be about 2-4°C below seasonal norms on 13-19 February.
Inland supply has also tightened since mid-January because of unplanned shutdowns at two major refineries in southern Germany. The 90,000 b/d Neustadt refinery was taken off line following an explosion and then a fire. Soon after, the 310,000 b/d Karlsruhe refinery, the country's largest, shut down one of its three production lines owing to a technical fault, and is expected to remain off line until early March. Some LPG suppliers from the affected refineries have restricted loading this month, with one plant heard to have cut these by 30pc and another by a third, market participants say. This has in turn spurred buying interest from ARA's 65,000t Vopak Terminal in Flushing and 75,000t Antwerp Gas Terminal.
Plant repairs are unlikely to bring a supply reprieve given the spring maintenance season is approaching. The 125,000 b/d Vohburg refinery is expected to be taken off line along with several units at Neustadt in early March. Closer to the ARA hub, ExxonMobil's 310,000 b/d Antwerp refinery might shut down for maintenance in the second half of February having already experienced issues earlier this month, market participants say. And the first permanent closure of 2025 will take place in March when Shell closes the 147,000 b/d Wesseling facility in Germany.
Refinery availability of LPG has also started to be pressured by high natural gas prices. The benchmark Dutch TTF front-month gas assessment reached a two-year high of $838/tin early February on colder and less windy forecasts. A bullish natural gas market has encouraged upstream North Sea producers to leave as much LPG in the natural gas stream as possible, with large cargo propane averaging a $148/t discount to gas since the start of 2025. Refinery supply was unaffected given railcar prices remained at sizeable premiums earlier this year. But the TTF flipped to a $12/t premium to propane railcars in the first half of February compared with a discount of $75.25/t in January and $144/t in December.
Getting by on their own supply
Refineries are now burning their LPG in place of gas, market participants say. Almost 75pc of Europe's LPG supply comes from refineries under normal conditions. Refinery consumption of LPG surged to 1.1mn t/yr in Europe in 2022 when natural gas prices last surged, which is 7pc of regional output and compares with a long-term average of just over 250,000 t/yr, Argus Consulting data show.
Resales of Poland-bound cargoes have put some downward pressure on ARA railcar prices. Poland continues to struggle with oversupply following overzealous stockbuilding prior to the EU's enforcement of an embargo on imports of Russian LPG and owing to weak demand for re-exports to Ukraine. A blockade of Kazakh cargoes on Poland's eastern border, with 7,500t reportedly stuck at the Malaszewicze crossing, arrived with previously held product. Unable to find buyers, Polish firms have started reselling cargoes bought from northwest Europe. A day does not go by without an offer from eastern Europe, a German LPG distributor says.
