LPG: View of the markets - October edition
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Global propane prices rose in early September due to Chinese demand but fell after Saudi Aramco’s lower-than-expected October CP. Asia-Pacific crackers favored LPG over naphtha amid discounts. Europe saw strong US LPG inflows, easing prices despite initial gains. US propane exports weakened due to narrow arbitrage and high freight costs, pressuring domestic prices. Butane demand remained soft. Looking ahead, weak fundamentals may offset seasonal price recovery, while Middle East supply growth and muted Asia demand could pressure prices into 2026.
Asia-Pacific
Global propane Prices
- Average of propane delivered prices into Japan in September increased by 3.6pc from a month ago owing to strong demand from China for October shipments.
- Importers stockpiled ahead of US-China tariff truce expiration on 10 November as well as the week-long National Day holidays.
- Prices fell by 11.5pc over mid-September, into October, following the lower-than-expected October CP announcement, which repriced delivered values in the Asian market for November shipments.
LPG versus naphtha
- Regional crackers continued to maximise the switch to propane and butane in the wake of continued weakness in the LPG complex.
- The front-month propane swaps averaged $52/t discount to its naphtha counterpart in September, from discounts of $54/t the previous month.
Saudi Aramco posted Propane & Butane CP
- Saudi Arabia’s state-controlled Saudi Aramco dropped the October Contract Prices (CP) for propane and butane to $495/t and $475/t respectively, down by $25/t and $15/t from last month.
- Outlook on the November CP weakened sharply from $555/t at the end of September to as low as $454/t at the start of October as market participants anticipated bearish supply fundamentals despite the onset of winter in northeast Asia.
Chinese PDH performance
- Run rates at Chinese PDH plants rose to 74pc in the beginning of October owing to improving production margins.
- Outlook on increased propane demand from the PDH sector was clouded by new polypropylene capacity growth in China in the fourth quarter. Rising downstream product yields could depress margins even as propane feedstock costs falls.
Europe
The large cargo Amsterdam-Rotterdam-Antwerp (ARA) propane market climbed by 5pc in the first half of September, reaching $480/t in the second half of September from $454.75/t at the start of the month, as sustained buying interest and repeated bidding attempts lifted sentiment and values.
Over the same period, the physical large cargo differential to front-month cif ARA paper strengthened from a deep -$8.75/t discount to parity by 23 September. But once the prompt buying positions were covered, prices began to ease again, gradually drifting lower to $448.50/t by the end of September. The physical premium slipped back into negative territory at minus $1.50/t, as the lighter grade continued to face pressure from record-high inflows of US LPG.
Europe maintained exceptionally strong intake of US cargoes in September, with total arrivals reaching 669,000t, up from 632,000t in August, reinforcing the continent’s role as a key outlet for surplus US supply.
The steady inflow of product has kept regional demand largely satisfied, with buying interest from the heating sector remaining subdued. Petrochemical demand has also been sluggish, even as propane’s sharp discount to naphtha continues to make the lighter grade a more economical feedstock option.
On butane public activity was largely muted in September, but private inquiries gathered pace lifting the price relative to naphtha paper by more than two percentage points to 86pc by the end of the month from 83.75pc on 1 September.
Americas
A weaker outlook for propane demand in China and a November AFEI/LST arbitrage near $150/t on paper meant no prospective buyers have been willing to pick up incremental cargoes of US propane for the November loading schedule. Only one late-October loading was confirmed cancelled, although others remained in jeopardy pending available freight.
In the domestic market, the narrower Asia arbitrage spurred bearish sentiment at Mont Belvieu, Texas. Prompt-month LST propane fell to 66.6875¢/USG ($347.44/t) on the first ten days of October, a seven-week low, alongside declines in delivered markets in Asia. Propane’s value relative to crude fell to 44.8pc that same day, roughly in line with values seen last year. The US Energy Information Administration (EIA) reported an expected 2.87mn bl draw in propane stocks the week ended 3 October, leaving US inventories up 9pc above the five-year average.
Mont Belvieu butane prices are down 25.8pc in the first week of October versus last year amid a tepid start to the winter gasoline blending season. Thin blending demand left butane valued at 57.2pc of Nymex WTI at the beginning of October, down versus 68.2pc of crude last year.
US ethane prices surged to a six-month high of 29.375¢/USG on 8 October as higher natural gas prices and brisk exports continue to support near-term prices.
Outlook
The quarter ahead
- The Saudi CP for October came in at $50/t below market expectations
- This price drop reverberated around the world as the US lowered prices to remain competitive into the Asian markets
- The new Nederland terminal expansion is still only operating at a fraction of its full capacity. US exports will continue to rise in the coming months
- We expect a rebound in prices over October as the market recovers from the initial shock of the CP, but weak LPG fundamentals will neutralise the usual winter price increase
The next 6 months and longer term
- Middle East supply will begin to ramp up, pressuring prices through 2026
- Demand growth from the Asia-Pacific will be muted
- Geopolitics remains the most important uncertainty to the forecast
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