LPG price rise cuts PDH margins but demand still strong
Propane prices have hit multi-year highs supported by low US stock inventories, write Frances Goh and Yaxiu Wang
Sharp increases in Asia-Pacific propane prices have significantly cut propane dehydrogenation (PDH) margins in China this month. But price falls towards the middle of July have pulled margins back from the brink of losses, and firm demand for LPG from petrochemical producers in China and Japan is expected to continue.
PDH margins have narrowed rapidly from a high of $300/t in early May to just $13/t as of 13 July as a result of declining olefins prices and surging propane values. Cfr northeast Asia propylene prices hovered at close to a yearly high of $1,097/t on 19 May, on an import parity basis, before easing to $989/t by 13 July after a number of PDH facilities returned from maintenance shutdowns and drove operating rates up to 87pc.
Feedstock prices faced different dynamics, pushing delivered Japan propane prices up to a six-year high — the Argus Far East Index (AFEI) hitting $713.75/t on 6 July. AFEI prices have risen by around a quarter from mid-May to mid-July during the typical summer lull in demand and when buyers profit from lower prices.
Regional propane prices have been supported by US inventories flirting with the lower end of historical trends, with concerns mounting the stocks will not adequately build before winter. Asia-Pacific prices had to compete with rising US values to maintain arbitrages and meet growing demand in China and Japan. Non-petrochemical demand in the key import markets of India, Indonesia and south China have ebbed and flowed, affected by Covid-19 rates and restrictions, but east China's imports — where the majority of the country's PDH and LPG-fed ethylene crackers are found — have remained on an upward trajectory as capacity increases.
China's LPG imports hit a record high of 2.24mn t in May, while arrivals from the US doubled to 3.78mn t in the first half of this year. The influence exerted by US exports on China's PDH sector and vice versa is set to deepen as more capacity is brought on line.
Another two PDH plants are due to open in July-August. Anqing Taiheng's 300,000 t/yr unit in Anhui province, which will be half fed by imported propane, is expected to start up in the second half of July and has started buying pressurised propane cargoes from domestic terminals, traders say. Qingdao Jinneng's 900,000 t/yr unit in Shandong province — the largest in the world —could follow suit, with the firm expected to start trialling its propylene unit this month.
Riders on the storm
PDH operators with integrated downstream units are better suited to ride out the surge in feedstock costs, traders says. Cfr northeast Asia polypropylene raffia prices were firm at $1,100/t as of 16 July. But more importantly, the opening of new PDH plants or expanded ones has led to fierce competition for market share. Established facilities have been exporting propylene and polypropylene since the start of 2021 to carve out their position in an increasingly crowded space. Arbitrage opportunities for olefin exports to Latin America and Europe opened up in the first quarter, partly triggered by the severe cold weather in Texas, US, in February, which took producers off line. This enabled some Chinese PDH operators to make inroads into olefin and polyolefin import markets.
In Japan, demand for propane and butane cargoes for August and September delivery has been firm despite the start of summer and a flat forward price structure, limiting interest in stockbuilding. The country's flexible crackers have continued to favour LPG despite narrowing discounts compared with naphtha owing to attractive downstream yields. Propylene availability in Japan is tight on planned and unplanned shutdowns, while cfr northeast Asia butadiene prices are near three-year highs at $1,425/t as of 16 July. And Japanese refiner Eneos' cracker is expected to run at 80pc until February 2022.
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Japan’s Idemitsu builds stake in refiner Fuji Oil
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US Gulf lowest-cost green ammonia in 2030: Report
US Gulf lowest-cost green ammonia in 2030: Report
New York, 16 April (Argus) — The US Gulf coast will likely be the lowest cost source of green ammonia to top global bunkering ports Singapore and Rotterdam by 2030, according to a study by independent non-profits Rocky Mountain Institute and the Global Maritime Forum. Green ammonia in Singapore is projected to be sourced from the US Gulf coast at $1,100/t, Chile at $1,850/t, Australia at $1,940/t, Namibia at $2,050/t and India at $2,090/t very low-sulphur fuel oil equivalent (VLSFOe) in 2030. Singapore is also projected to procure green methanol from the US Gulf coast at $1,330/t, China at $1,640/t, Australia at $2,610/t and Egypt at $2,810/t VLSFOe in 2030. The US Gulf coast would be cheaper for both Chinese bio-methanol and Egyptian or Australian e-methanol. But modeling suggests that competition could result in US methanol going to other ports, particularly in Europe, unless the Singaporean port ecosystem moves to proactively secure supply, says the study. In addition to space constraints imposed by its geography, Singapore has relatively poor wind and solar energy sources, which makes local production of green hydrogen-based-fuels expensive, says the study. Singapore locally produced green methanol and green ammonia are projected at $2,910/t and $2,800/t VLSFOe, respectively, in 2030, higher than imports, even when considering the extra transport costs. The study projects that fossil fuels would account for 47mn t VLSFOe, or 95pc of Singapore's marine fuel demand in 2030. The remaining 5pc will be allocated between green ammonia (about 1.89mn t VLSFOe) and green methanol (3.30mn t VLSFOe). Rotterdam to pull from US Gulf Green ammonia in Rotterdam is projected to be sourced from the US Gulf coast at $1,080/t, locally produced at $2,120/t, sourced from Spain at $2,150/t and from Brazil at $2,310/t. Rotterdam is also projected to procure green methanol from China at $1,830/t, Denmark at $2,060/t, locally produce it at $2,180/t and from Finland at $2,190/t VLSFOe, among other countries, but not the US Gulf coast . The study projects that fossil fuels would account for 8.1mn t VLSFOe, or 95pc of Rotterdam's marine fuel demand in 2030. The remaining 5pc will be allocated between green ammonia, at about 326,000t, and green methanol, at about 570,000t VLSFOe. Rotterdam has a good renewable energy potential, according to the study. But Rotterdam is also a significant industrial cluster and several of the industries in the port's hinterland are seeking to use hydrogen for decarbonisation. As such, the port is expected to import most of its green hydrogen-based fuel supply. Though US-produced green fuels are likely to be in high demand, Rotterdam can benefit from EU incentives for hydrogen imports, lower-emission fuel demand created by the EU emissions trading system and FuelEU Maritime. But the EU's draft Renewable Energy Directive could limit the potential for European ports like Rotterdam to import US green fuels. The draft requirements in the Directive disallow fuel from some projects that benefit from renewable electricity incentives, like the renewable energy production tax credit provided by the US's Inflation Reduction Act, after 2028. If these draft requirements are accepted in the final regulation, they could limit the window of opportunity for hydrogen imports from the US to Rotterdam to the period before 2028, says the study. By Stefka Wechsler Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Romania's growing autogas market boosts 2023 imports
Romania's growing autogas market boosts 2023 imports
Demand for autogas is expected to continue rising in the country as it maintains a discount to competing motor fuels Moscow, 16 April (Argus) — Romania's autogas consumption increased last year as more drivers were attracted by its lower price compared with gasoline and diesel, helping to lift imports to the country by over a quarter on the year. Autogas sales in the country rose by 10,000-30,000t on the year to 270,000-300,000t as a result of its lower price against other motor fuels. "The ratio of autogas to gasoline prices fell below 50pc last year from 60-65pc owing to rising global gasoline and diesel prices," a Romanian trader says. Romanian autogas prices stood at 3.27-3.35 lei/litre (71-73¢/l) last week, while gasoline prices were Lei7.12-7.15/l ($1.50/l), putting the former at 47pc of the latter . This compares with autogas' cost of Lei3.91-3.98/l in April 2023, and gasoline at Lei6.63-6.69/l, with a ratio of 59-60pc. The country's autogas demand could have been even stronger last year had it not been for a fire at the Flagas refuelling station in Crevedia, near Bucharest, in August. Immediately after the accident, a special commission consisting of firefighters, police, an environmental body and tax authorities was formed to carry out inspections at the country's autogas stations, resulting in many being closed. "The commission would close a fuelling station for a slightest non-compliance, so some retail operators shut down their fuelling stations before it arrived," a market participant says. Romania has more than 1,000 autogas refuelling sites. But around 300 stations are reported to have closed since September 2023 following the incident. This resulted in sales dropping in September-December last year compared with the same period in 2022, according to local market participants. The growth in autogas sales over the whole of last year boosted Romania's LPG imports to around 353,000t compared with 278,000t in 2022, Vortexa data show. All of the country's LPG deliveries were to its sea ports of Midia, Mangalia and Galati, as rail shipments from Russia transiting Ukraine, which had been 2,000-3,000 t/month, halted after the war in Ukraine began in late February 2022. Imports were also supported by cuts to domestic output and an increase in overland exports. Exports rose by about 5,000–10,000t to 330,000–340,000t in 2023, according to market participants, with most of this supported by rising shipments to Ukraine, growing by 45,600t to 235,600t. Romania's LPG imports from Egypt doubled to 104,200t, Vortexa data show, with most of this supplied by trading firms Naftomar and Evicor. Arrivals from Turkey grew by 51,300t to 69,600t, mostly delivered by Turkish distributors Aygaz and Milangaz. More Kazakh LPG arrived from Georgia's Batumi port, rising by 14,800t to 27,600t, to partially offset the loss of supply from Russia's Taman terminal after exports halted in May 2023. LPG arrivals from Algeria and the US also increased last year (see table). Gassing up Romania's autogas demand should be on course to continue expanding this year, with autogas prices at around an 80¢/l discount to gasoline at the beginning of April. The government raised autogas excise duty again from 1 January, to around Lei874/t ($191/t). But it also increased the duty on gasoline to Lei2.02/l and on diesel to Lei1.85/l, and will do so again from 1 July to Lei2.38/l and Lei2.18/l, respectively, while the rate on autogas is expected to remain unchanged. Autogas sales in the country are expected to increase to 280,000-320,000t this year from 270,000-300,000t in 2023 because of lower excise tax on LPG compared with gasoline and diesel, according to traders. Exports should stabilise while domestic output will increase as technical issues at the Rompetrol refinery are resolved, they say. Seaborne LPG imports to Romania '000t 2023 ±% 2022 Egypt 104.2 99.5 Turkey 69.5 35.7 Russia/Kazakhstan 54.5 -163.0 Georgia 27.6 86.8 US 27.1 49.0 Algeria 26.9 50.2 Tunisia 12.0 11.1 Greece 6.3 -235.4 Croatia 5.7 -456.2 Italy 3.7 183.2 Netherlands 3.4 247.4 Libya 1.1 -283.3 Other 11.6 11.6 Total 353.5 30.8 — Vortexa Romania LPG demand by sector 2022 Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
LPG World editorial: That time of year?
LPG World editorial: That time of year?
Increased US LPG supply is changing global markets, having a dampening effect on traditional seasonal price fluctuations, writes Peter Wilton London, 16 April (Argus) — As the northern hemisphere winter disappears into the rear-view mirror, the lack of seasonality in LPG prices in the key trading hubs of northwest Europe and northeast Asia has been striking. In Europe, large cargo prices for propane delivered into Amsterdam-Rotterdam-Antwerp (ARA) held steady through winter at around 50pc of prices for regional benchmark Brent crude. In Asia, Argus Far East Index (AFEI) propane assessments, the benchmark for large cargoes sold to Japan, South Korea and China, lost some ground against crude, slipping to below 60pc of Dubai crude futures this month from around 70pc in late December. This appears to be another sign of how ample US supply, courtesy of the country's shale revolution, has changed global markets. Now, the US can not only provide volumes when net-short regions require them — it can seemingly leave the export taps open regardless of needs elsewhere, severely dampening seasonality in seaborne cargo markets in the process. Is the influence of robust US export volumes now so great that seasonal fluctuations in the crucial residential and commercial sectors — estimated to account for 45pc of global LPG demand this year — have little effect on spot prices? A cursory glance at the 2022-23 northern hemisphere winter would suggest not, and that the 2023-24 winter was perhaps an aberration, given how prices spiked in January 2023. In the second half of that month, cif ARA propane gained 12 percentage points against Brent crude, while AFEI surged by 15 percentage points against Dubai crude — a classic winter bull run. But this was not driven by heating demand. The trigger was a perfect storm of supporting factors in the key Chinese market, including a concertina effect on demand — following disruption caused by December 2022's post-Covid reopening of its economy and the late January 2023 lunar new year holiday — that effectively squeezed many weeks of buying for its propane dehydrogenation (PDH) plants into that early January period. Stripping out that spike, 2022-23 winter pricing patterns look much less seasonal. Following the surge in prices, average monthly cif ARA assessments were rangebound for a full year at 45-55pc of Brent, with AFEI in a similarly tight 53-67pc range. Much greater price variance used to be the norm in winter, when seaborne propane prices would react inversely to falling temperatures. Seasonal disruption Growing US supplies supported by strong domestic natural gas prices look likely to remain the dominant influence. But several smaller demand-side factors could also further inhibit seasonality. Firstly, heating demand's vulnerability to decarbonisation from alternative renewable liquid gases. The idea of renewable feedstocks reaching steam crackers or PDH units in any great volume is, for now, largely an aspirational environmental goal — usage of and investment in bioLPG production by petrochemical companies is modest at best. The firms that are either significant buyers of bioLPG or launching renewable liquid gas projects are LPG distributors such as SHV Energy and UGI International. Secondly, if current policy support for expanding LPG cooking schemes to help tackle energy poverty in developing economies genuinely bears fruit in the coming decades, this non-seasonal demand will soak up much more supply from the US and elsewhere than traditional, temperature-dependent markets, and hence become more influential on prices. Thirdly, as the IEA has noted, the most recent Cop climate pledges fall far short of what is needed to meet the Paris Agreement's 1.5°C ceiling for global temperature rises above pre-industrial levels. And a warmer planet will mean lower demand for fuels, clean or otherwise, for space heating. AFEI % of Dubai crude in heating season Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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