European LPG industry frets on supply outlook

The region's heating sector is concerned about LPG supplies dwindling as refinery rates drop despite weak demand this winter

Europe's LPG industry is becoming increasingly concerned about the availability of supply as a result of the coronavirus pandemic, despite heating demand easing as temperatures across the region rise.

The region's LPG demand for heating, typically in households not connected to a natural gas grid, has been relatively unaffected so far by the crisis that has forced the full or partial lockdown ofnearly all European countries. Panic buying has in fact raised demand in some countries as people rush to ensure they have enough to heat their homes, according to an industry source.

LPG demand in Germany has grown since the beginning of March as customers take advantage of lower prices amid mounting uncertainty, an LPG supplier in the country says. But demand for heating should be largely unaffected by the coronavirus, with the autogas and commercial sectors more likely to be hit in Germany, another local source says.

The industry is concerned that cuts to refinery runs as road and aviation fuel demand plummets will limit availability of LPG in Europe. "The market does not know yet what will happen as refineries are not really telling them anything about their expectations," an industry source says.

LPG is considered an essential commodity in most countries that have introduced lockdowns, meaning distribution is safeguarded. But staffing issues in the UK have arisen as a result of sickness or working from home. The effect so far has been limited but could hinder the industry if the pandemic worsens, the industry source says. Seaborne deliveries in Europe have yet to be affected, but face the same risk from port and terminal employees falling ill.

Autogas demand is likely to drop by as much as 20-50pc as a result of government restrictions on movement across Europe, particularly if these last into May and potentially beyond, regional market participants and analysts say. Consumption in Italy, one of the largest autogas markets in Europe, could halve this year to 800,000t from 1.6mn t in 2019.

Europe consumed 10.9mn t of autogas in 2019, Argus data show. Consumption was forecast to reach 11mn t in 2020 prior to the pandemic.

Europe LPG market 2018