<article><p class="lead">The Chinese government has started to adopt stricter travel measures in the run-up to next month's lunar new year holiday to control recent outbreaks of Covid-19, further clouding the domestic demand outlook for LPG.</p><p>The central authorities are encouraging migrant workers not to travel back home for the lunar new year holidays to avoid the further spread of Covid-19. While the government's directive to limit travel could boost demand for residential LPG in east and south China where many migrant workers are employed, its recommendation to avoid gatherings of more than 10 people could weigh on commercial LPG demand.</p><p>Workers had been encouraged to go back home in batches before the latest outbreaks, but have now been asked to stay in cities where they work after the number of confirmed Covid-19 cases rose in the north of the country. China confirmed another 103 cases yesterday, most of which were in north China provinces such as Heilongjiang, Jilin and Hebei near Beijing.</p><p>Workers are only permitted to go back home with a negative Covid-19 test that will remain valid for seven days, the national health commission said yesterday. Details of the policy implementation will be decided by local governments but it could result in reduced holiday travel activity.</p><p>Authorities were asking each individual to submit travel plans for the lunar new year holiday after the rise in Covid-19 cases in northeast China in early January, said a LPG importer in the Pearl river delta area. Some cities in east China have given financial incentives to those who stay where they work.</p><p>More workers staying in the south and east of China are expected to boost natural gas demand. But it is hard to say if regional LPG demand will also see a net benefit, considering an expected a drop in commercial demand, a south China importer said.</p><p>East China LPG importers are also concerned about demand during the lunar new year holidays. An importer from the region said 60pc of LPG in in Zhejiang and Jiangsu provinces are used by the commercial sector with the other 40pc consumed by the residential sector. So the directive to have gatherings of no more than 10 people could weigh on the region's largest LPG consuming sector. </p><p>Refineries prior to the holiday usually offer lower prices to encourage sales and keep inventories low. But as most importers in east China have low inventories this year, no large price cuts are expected. </p><p>LPG demand from the commercial and residential sectors typically falls to 50pc of the average during the lunar new year period, as business shut down and workers head home to less developed areas. But it recorded a 70-80pc drop last year because of a nationwide lockdown after the initial Covid-19 outbreak, said market participants in east and south China. China's total 2020 LPG supplies, comprising domestic production plus net imports, totalled 63.11mn t, according to data from the national bureau of statistics and China's customs.</p><p>Importers are also concerned about possible labour shortages at ports and customs because of the lunar new year holidays, which could delay discharge and limit supplies at terminals.</p><p>East terminal wholesale prices last year nudged lower by 2pc to 4,700-4,900 yuan/t on 23 January, a day before the lunar new year holidays, from Yn4,800-5,000/t on 13 January. Prices at import terminals in the Pearl river delta area fell by 4.5pc to Yn4,475-4,750/t over the same period. </p><p>The lockdowns and the extended lunar new year holiday as a result of the Covid-19 outbreak triggered further price drops last year. East China terminal prices slipped by 7.5pc to Yn4,350-4,500/t on 7 February from 23 January and slumped by 12.3pc to Yn3,910-4,170/t at south China import terminals in the Pearl river delta area.</p></article>
