The market has readied for a shift in Chinese buying patterns, while cautiously watching for signals of Iran's response, writes Matt Scotland
International LPG prices and VLGC freight rates surged on 13 June alongside crude benchmarks after Israel's attacks on Iran, raising fears of wider disruption to Middle Eastern energy trade. But prices stabilised on 16 June as the markets assessed the odds of attacks on energy infrastructure and shipping in the region.
Northeast Asian propane import prices on the Argus Far East Index (AFEI) and the Argus Ningbo Index climbed by more than $30/t to $577/t and $636.25/t, respectively, on 13 June as the market geared for stronger Chinese buying interest for US cargoes if Mideast Gulf supplies are disrupted. The Mideast Gulf front-month propane contract price swap edged up to $588/t, cutting its discount to the AFEI swap to $16/t from $39.50/t, reflecting the shift in demand to US supply.
US Gulf coast LPG prices also rose abruptly. The fob propane cargo price jumped by nearly $21/t to $442.20/t, and the Mont Belvieu LST price rose by more than $23/t to $423.30/t. Firming AFEI paper values earlier in the day widened the US-Asia propane arbitrage to about $147–150/t, helping to lift loading fees at Gulf coast terminals, which had been at close to cancellation levels on weak Asian petrochemical margins and US-China trade concerns.
Northwest European propane import prices increased by $22.50/t to $485.50/t cif Amsterdam-Rotterdam-Antwerp, fuelled in part by concerns that growing Asian demand for US cargoes could reduce US availability for the region. But sentiment in the region was subdued with major petrochemical buyer Dow still offering a cargo.
VLGC freight rates on the Ras Tanura–Chiba route from the Mideast Gulf to Asia climbed from $69/t to $76/t on 13 June and to $85/t by 16 June, while Houston–Chiba and Houston–Flushing rates from the US to Asia and Europe were steadier as shipowners became cautious about the growing risk in the Middle East, trimming vessel availability. A closure of the Strait of Hormuz — which accounts for 25-30pc of global crude and gas flows — would severely restrict Mideast Gulf exports.
International LPG prices steadied on 16 June as the markets reflected on the latest conflict and likelihood of the Strait of Hormuz being shut off. Much will depend on Iran's current capabilities and how that might affect its strategy. Tehran has appealed to US president Donald Trump to halt Israeli strikes and resume nuclear diplomacy, but he appears reluctant to intervene.
Only one confirmed strike has affected Iranian LPG facilities — a drone attack on two gas processing plants in Assaluyeh. These can produce 77,000 b/d of gas condensate, 2,900 t/d of LPG and 2,750 t/d of ethane. But only one train was hit, according to state media. A separate fire broke out at the Fajr-e-Jam gas processing plant, which can produce around 200 t/d of LPG and 80 t/d of natural gas liquids. The affect on Iranian LPG output should be limited as it has plenty of gas processing capacity and it is the summer off-season for demand, consultancy FGE's Iman Nasseri says. China is forecast to import around 4.6mn t of LPG from Iran in the first half of 2025, which would be more than a quarter of its total, Kpler data show.
