Oil & Energy
Global LPG Recovery Stalls as Hormuz Disruption Shifts Trade to US Exports, Vortexa Says
The recovery in global liquefied petroleum gas imports has stalled after renewed disruption in the Strait of Hormuz threatened Middle East Gulf exports, increasing reliance on record US shipments to keep the market supplied, Vortexa strategists said in a note on Friday.Global LPG imports had begun recovering in July after months of conflict-related disruptions, with preliminary data for July 1-22 showing seaborne imports climbing above the five-year seasonal average.The rebound was driven primarily by stronger exports from the US Gulf Coast and the Middle East Gulf.Rohit Rathod, senior oil market analyst at Vortexa, said that the effective re-closure of the Hormuz following the collapse of the US-Iran ceasefire on July 7 has cast doubt over whether that recovery can be sustained into August.The disruption comes after global LPG imports fell sharply from late January as tensions in the Middle East escalated, before gradually recovering through the second quarter.The US has emerged as the principal supplier offsetting lost Middle Eastern volumes.Vortexa said that through July 25, global arrivals of US-origin LPG reached a record of about 2.9 million barrels per day, with Northeast Asia accounting for the largest increase in demand.The data analytics firm said shipments to the region rose by about 110,000 b/d from the previous month, led by stronger imports into China and India.Though throughput at some US Gulf Coast export terminals, particularly Enterprise's Houston terminal, eased during July, widening butane-to-propane price spreads are expected to support stronger butane exports in August.Simultaneously, the arbitrage for US LPG cargoes to Asia has reopened via the Panama Canal after remaining uneconomic through much of June, encouraging exporters to continue sending cargoes east.China has been the biggest beneficiary of the changing trade flows, with LPG imports rising to about 1.4 million b/d in July, approaching levels seen before the conflict.Rathod said that the increase was supported by higher imports from the US as well as a temporary recovery in Middle Eastern shipments during the ceasefire period.India's imports also recovered to about the five-year seasonal average, driven by increased US supplies to both its eastern and western coasts, helping compensate for reduced availability from nearby Middle Eastern producers.Though supply availability has improved, profitability in Asia's petrochemical sector remains under pressure.Vortexa said propane dehydrogenation plants increased operating rates in July following earlier supply disruptions, but margins weakened as rising feedstock costs outpaced improvements in product prices.Propane continues to retain a cost advantage over naphtha as a petrochemical feedstock, although that advantage has narrowed.Going forward, Rathod said the pace of any recovery in global LPG trade will depend largely on whether exports from the Middle East Gulf can resume via the Hormuz.Under a scenario in which the waterway remains closed, Vortexa said global LPG imports are projected to remain below seasonal norms, with the US continuing to shoulder much of the world's export supply.
