NGLStrategy LLC outlines the next phase of developments in Global LPG dynamics:

"Geopolitical factors are one of the key elements influencing the LPG market in 2019, with continued OPEC production cuts, sanctions limiting delivery of Iranian product and the ongoing US/China trade tariffs.

Market fundamentals remain in place with the US continuing to grow its NGLs production, demand being dominated by retail market, and there is increased necessity for the petrochemical market to absorb the additional seaborne supply.  To-date, propane and butane prices have been dictated by its relationship to alternative feedstocks, e.g. naphtha for the production of ethylene via steam cracking.

LPG infrastructure developments continues in the West (new fractionation capacity, additional steam cracker capacity) and East (new PDH plants and steam crackers in China, additional propane cracking flexibility in Korea). Furthermore, this year has seen additional seaborne supply from new Canadian export terminals as well as the ramp up of exports arising from the new Australian LNG projects.

Yet, restrictions are still in place, for example US export capacity, and the market awaits the next phase of new developments.

By the end of the year, additional LPG export capacity is expected to come on stream in the US, and despite the current tariffs in place between the US and China, demand in China is expected to continue to increase particularly as more PDH facilities will begin operation at the end of 2019/beginning of 2020.

The oversupply of the US market, inventory build-up, infrastructure bottlenecks and soft global demand has led to a weak Mont Belvieu price. This along with tightening shipping supply/demand has allowed shipping freight to recover from previous depressed levels. Freight rates are anticipated to remain relatively strong for the remainder of 2019 and beginning of 2020, affecting trading arbs.

Overall, the LPG market continues to evolve until the additional export capacity is on-stream and additional petrochemical plants start up – the timing of both will significantly influence the balance of the market either way. New legislation (IMO2020) and political developments particularly in the Middle East, will of course be influential not only on supply/demand but on the price of propane vs butane. Freight should it remain at firmer levels will ultimately affect trading arbs and could play a key role for many market players as we head into 2020."

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