Average industrial LPG prices in Brazil have risen in the past few months largely because of state-controlled Petrobras' practice of auctioning excess supply.
While auctions have always been part of Petrobras' contractual framework with distributors, Petrobras only began to use them in November.
Petrobras is not auctioning true surplus volumes, according to market participants, but is rather withholding part of previously agreed supply to create an artificial surplus that is then auctioned off, often at significantly higher prices.
The auctions are highly unpredictable — varying in location, volume and timing — which creates uncertainty and fierce competition among buyers, with premiums generally exceeding 20pc. They exceeded 60pc in Betim and Araucaria, in Minas Gerais and Parana states, respectively, while soaring to 132pc in Paulinia, in Sao Paulo state.
"We've observed a price increase since April, around R0.30/kg ($0.05/kg)," the supply manager of a multinational company said. "But it's difficult to predict future behavior, which complicates planning and budgeting."
Petrobras appears to be balancing government pressure to keep official LPG prices lower with the pursuit of higher returns, resulting in a dual pricing system: some sold at a listed price, the rest auctioned at a premium.
Meanwhile, hydrocarbons regulator ANP published a proposal, as part of its regulatory agenda, aimed at increasing LPG usage and market competition, focusing on the bottled LPG segment. But national LPG association Sindigas argues that the real bottleneck lies in supply consistency and volume availability, not in the downstream.
Petrobras still controls LPG import infrastructure. To reduces their dependence on it, distributors Copa Energia and Ultrapar are developing LPG terminals in the Suape and Pecem ports, in northeast Brazil, set to open in 2027 and 2028 with storage capacities of 71,000t and 62,000t, respectively. Brazil more than doubled its LPG imports from Argentina in June to meet peak winter demand.
Despite regulatory liberalization allowing broader use of LPG, the market remains mature with limited growth potential. This makes infrastructure investment risky, especially when Petrobras still dominates primary logistics and pricing mechanisms, Sindigas president Sergio Bandeira said.
