Asian LPG market overview

How tariffs reshaped Asian LPG markets: Trade flows, pricing shifts and the changing feedstock landscape

The Asian LPG market has undergone one of its most significant structural shifts in recent years, driven largely by the US–China trade war and the cascading impact of tariffs on pricing benchmarks and trade flows. What began as a geopolitical dispute has now materially altered shipment patterns, reshaped price relationships and redefined the competitiveness of LPG versus other petrochemical feedstocks across the region.

Drawing on Argus’ market intelligence and data, this analysis breaks down how the region recalibrated in 2025 — and what these changes signal for 2026 and beyond.

China’s import mix shifts

China’s LPG import landscape shifted dramatically following the imposition of tariffs on US origin material in April 2025. US cargoes — once a dominant component of China’s supply—fell by half over July-December 2025, compared with the same period in 2024.

To compensate, Chinese importers pivoted aggressively towards alternative supply sources:

• Middle Eastern deliveries rose by more than 3mn t, becoming the primary replacement for lost US flows.
• Australian LPG volumes to China surged, with the latter attempting to maximise purchases from nearby producers.
• Canadian LPG exports to China began for the first time, with volumes rising steadily since the second quarter of 2025 — an entirely new trade corridor created out of necessity.
  
   

China maintained solid demand in its largest consuming segment — propane dehydrogenation (PDH) — which grew by around 3mn t in 2025, despite tariff challenges. But steam cracker demand contracted by roughly 3mn t, reflecting the diminished competitiveness of tariff inflated US LPG relative to naphtha and emerging rival feedstocks such as ethane.

Japan, India, and southeast Asia absorb displaced US cargoes

China turned away from US supply, but other Asian buyers stepped in to absorb the displaced barrels.

Japan backfills its own system

Japan’s imports from the US increased by around 2mn t — not because of rising domestic demand but because Japanese suppliers re routed their Canadian and Australian cargoes into China, later replenishing domestic inventories with US supplies.

India becomes a structural US Buyer

India’s government mandated diversification policy required that at least 10pc of its LPG imports come from the US. As a result:

• US shipments to India climbed to around 2mn t.
• India also signed its first term US LPG contracts for 2026, suggesting longer term commitment regardless of geopolitical volatility.

Crucially, this increased US intake did not come at the expense of Middle Eastern supplies. Instead, India’s rising LPG consumption expanded the overall import pool.

Indonesia and Vietnam join the rebalancing

Both countries increased US imports by more than 1mn t as part of efforts to reduce trade deficits with the US, demonstrating how political calculation can be just as influential as price signals.

How the tariff shock repriced global LPG

Tariffs typically raise delivered costs. But the opposite occurred in benchmark pricing in 2025. The Argus Far East Index (AFEI), which reflects regional delivered values, fell sharply once tariffs took effect.

• 2024 AFEI average: $627/t
• 2025 AFEI average: $547/t
• Drop: $80/t (≈13pc)

The market adjusted downward to ensure demand destruction did not accelerate, rather than allowing prices to rise. This illustrates that global LPG benchmarks remain highly responsive to policy driven disruptions.

The CP relationship tightens, turns more volatile

Comparisons between Saudi CP plus freight and AFEI highlight a persistent and widening premium:

• 2023: $61/t
• 2024: $44/t
• 2025: $83/t

Higher Middle Eastern demand from China, combined with regional supply tightness, pushed CP linked values higher relative to AFEI.

At the same time, Gulf differentials to the CP exhibited significant volatility, with premiums and discounts swinging by as much as ±$50/t, underscoring the challenges buyers face when using CP as a pricing mechanism.

China’s crackers lose competitiveness, others Gain

Tariffs effectively removed China from participating in the LPG–naphtha switching economics enjoyed elsewhere in Asia.

In Japan, Korea, and Taiwan, LPG became competitive whenever prices dipped below 90pc of naphtha values, enabling these markets to capitalise on cheaper imported propane.

In contrast, Chinese crackers could not switch, given that tariff inflated LPG costs wiped out the advantage. China leaned more heavily into naphtha and began accelerating feedstock diversification as a result.

Ethane Emerges as the Next Disruptor

Ethane is rapidly becoming the most competitive alternative feedstock in Asia, and the US remains the dominant global supplier. Several trends underpin this shift:

• China’s ethane imports increased by 20% year on year to 6.5mn t in 2025.
• Projects across China are being retrofitted and expanding capacity to handle ethane as primary feedstock.
• New US export terminals and ~60 very large ethane carriers/ultra large ethane carriers (VLECs/ULECs) scheduled to enter service from 2028 will further accelerate flows.

To support industry transparency, Argus launched the cfr China ethane assessment in September 2025, providing a daily view of delivered US to China ethane economics.

Benchmark evolution: AFEI remains market’s anchor

Substitution effects, tariff arbitrage and rapid feedstock shifts have only strengthened the role of the Argus Far East Index as Asia’s most liquid and widely traded LPG benchmark.

• AFEI linked swap volumes grew by 12pc in 2025, exceeding 370mn t.
• This is over three times the liquidity of CP based swaps.

Market participants continue to gravitate towards a benchmark that is transparent, responsive and reflective of the real trade flows shaping modern Asian LPG dynamics.

Conclusion: A new normal for Asian LPG

The 2025 tariff shock did more than redirect cargoes. It also reshaped regional economics, fractured long standing price relationships, and accelerated Asia’s transition to diversified feedstocks like ethane.

Looking ahead, market participants should expect:

• Continued bifurcation between China’s tariff inclusive pricing and Japan/Korea’s AFEI linked values
• Stronger structural ties between the US and India/southeast Asia
• Rising competition between LPG, naphtha, and ethane in petrochemical markets
• Increasing preference for flexible, trade reflective benchmarks such as AFEI

As geopolitical pressures intersect with fast evolving demand centres, Argus will continue providing the transparency, data, and forward looking insights that producers, traders and downstream buyers depend on.

Author name: Esther Phua