An early end to the heating season helped to offset the region's logistical disruptions, writes Waldemar Jaszczyk
Northwest Europe's downstream propane market shrugged off logistical headaches from plummeting Rhine levels as prices faced sustained pressure from an abrupt drop in heating demand and improving refinery supply.
A severe decline in water levels on the Rhine river — the key waterway linking German downstream consumers to the Amsterdam-Rotterdam-Antwerp (ARA) hub — has upended propane barge logistics since April. Above-average temperatures have exacerbated a lack of precipitation to reduce levels at the key measuring point in Kaub, Germany — the shallowest part of the middle section of the river — to as low as 76cm, data from German monitoring service Elwis show.
Most LPG barges operating on the Rhine can carry less than half of their capacity, or 500t, with the threshold for full LPG cargoes at Kaub at 120cm. This has lifted freight costs as an increasing number of barges are booked to carry the same total volume. Water levels rebounded to 152cm by the end of May, but they remain less than half of the 305cm average for the month last year. And weather forecasts for drier-than-average conditions in northern and western Europe in June are causing growing concern that logistical limitations on buyers' preferred waterborne route may become more acute this summer.
But suppressed Rhine capacity for barges has failed to lift spot demand for propane transported by rail or road, with railcar prices at ARA plummeting since their February peak. The premium for 45t fca ARA railcars to cif ARA large cargoes — in 20,500t or 22,400t lots — averaged $60.25/t in May, substantially down from $156/t in March and $212.50/t over February. The outright price slid by over one-third to $490/t across the same timeframe, facing additional pressure from global tariffs-induced wider market losses.
Railcar prices surged early in the year on the back of tight supply as prolonged shutdowns at several inland refineries spilled over into the start of the maintenance season. The combination of accidents and planned works removed 1mn b/d of refining capacity in Europe — the largest amount simultaneously closed since the French pension strikes in 2023. This drop in supply coincided with a cold spell in mid-February, spurring more demand for product from ARA terminals.
But the market took a bearish turn as key sites came back on line in March, boosting product availability just as the weather started to warm. The average temperature for March on the continent was just over 6°C, around 2.4°C above the 1991-2020 average, making it the warmest March for Europe on record. An early end to the heating season allowed buyers to shrug off any further disruptions in supply from smaller refineries in Ingolstadt and Vohburg entering turnarounds or the shutting of Shell's 147,000 b/d Wesseling site.
Kallo youth
German barge importers additionally benefited from greater competition among suppliers as petrochemical producers, such as Austria's Borealis, increasingly refocused their storage tanks to sell product locally and capture the spread between large and small cargo propane. Borealis operates a 135,000m³ (78,600t) facility at the Antwerp Gas Terminal in Belgium, which will eventually supply the 750,000 t/yr propane dehydrogenation plant project in Kallo, due to launch next year.
As planned and unplanned works ended, both ARA and German refineries began offering more LPG at lower prices than at seaborne terminals. Simultaneously, demand fell below contracted supplies, which increased this year owing to ultimately unfounded fears of heightened spot competition from eastern Europe following the EU's ban on Russian LPG. Downstream storage units have been filled with excess supply as a result. German LPG stocks surged to 90,000t by March, Jodi data show, more than 17pc above the five-year average for the month.
