The threat of a US trade war with China, coupled with conflict in the Middle East, have left netbacks on propane delivered into Asia from the Middle East at a diminished advantage over shipments from the US. The shift could strengthen demand for US LPG going forward and give the world’s largest US exporter an even greater share of the global market.
China is the largest single buyer of US propane, accounting for 17.4mn t, or 27pc, of US LPG exports last year, according to commodity tracking firm Vortexa. The Trump administration’s threat of a 145pc tariff on Chinese imports in early April, since paused while negotiations continue, sent prices for propane in both the US and in Asia plummeting as exporters worked to shift trade flows between the Middle East and Asia.
Delivered prices into Japan on the Argus Far East Index (AFEI) are down $93.75/t, or 15pc, since the start of April. US Gulf coast fob propane prices are down $72/t, or 15pc, during the same timeframe. Yet VLGC freight on a Ras Tanura to Chiba basis has risen by $25.5/t since the start of April, while Houston-Chiba freight rose only $15.5/t. Comparatively lower freight costs for shipping out of the US means Asia buyers may be more likely to turn to the US for incremental volumes of LPG, particularly propane, unless trade dynamics shift.
Much of the higher costs on VLGC freight out of the Middle East stems from war premiums owing to the conflict between Israel and Iran. Even after the bombing_-s ceased in June, shippers continue to seek alternate routes for LPG shipments, pushing more vessels toward the Atlantic basin and disproportionately improving netbacks from the US.
The Middle East’s proximity to key demand centers in Asia gives it a natural advantage in term shipments to that region owing to cheaper freight costs, but the subsequent declines in US propane prices since the start of the trade war means the US is now more competitive versus Saudi Arabia and other key producing regions.
Delivered propane prices on the Argus Far East Index (AFEI) surged by $5.5/t to $591.75/t on 23 June immediately following the US strike on Iran and have since fallen below $540/t on the subsequent decline in global crude prices following the cessation of hostilities in the region. Netbacks from Asia on Middle East propane averaged $480.88/t in June, down versus $556.57/t in March. Netbacks to Asia from the US averaged $404.90/t in June, down from $429.25/t in March, illustrating the comparatively weaker hit to US shipping economics due to the turmoil.
The Middle East is almost entirely reliant on Asia for its LPG export demand, which accounted for 97.2pc of its liftings last year.
The US shipped 63.4mn t of LPG in 2024, versus the 46.3mn t shipped out of the Middle East, according to commodity tracking firm Vortexa. More than half of US cargoes, or 57.5pc, shipped to destinations in Asia.
Prospective new buyers for US LPG include India, which uses Saudi contract pricing for most of its term shipments. India imported 21.7mn t of LPG from the Middle East in 2024 and only 97,000t from the US.
In the meantime, however, the US has yet to see any meaningful impact to trade volumes as a result of the conflict. US propane shipments averaged 1.85mn b/d in June, according to the US Energy Information Administration (EIA), little changed from 1.83mn b/d shipped in March, prior to the trade war or the Mideast conflict. Terminal fees for spot propane cargos remain near cancellation-level economics, averaging Mont Belvieu +4.82¢/USG in June, as demand from China remains weak owing to poor petrochemical margins at propane-consuming PDH units in that country, a key source of US demand. In contrast, strong demand for US cargoes prior to the trade war sent terminal fees for US cargoes averaging +10¢/USG in March, when the outlook for Chinese petrochemical demand was more bullish and buyers were plentiful.
Author name: Amy Strahan, Editor, NGL Americas, LPG/NGL
