Japanese buyers have been purchasing LPG for December delivery at prices ranging from discounts of about $5/mt to premiums of around $3/mt relative to the December Far East Index through private negotiations, market sources said. However, not all of these purchases may be intended for winter heating purposes.
According to S&P Global Commodities at Sea, 801,000 mt of LPG has been discharged in Japan in November as of the 29th, compared with 883,000 mt in October. However, these volumes were lower compared with 1.039 million mt and 1.063 million mt of LPG discharged in Japan in November 2023 and December 2023, respectively.
Platts, part of S&P Global Commodity Insights, assessed front-month December North Asia propane swaps at an average of $624.50/mt in November as of the 28th, down from the whole-month October average of $661.34/mt.
“The Japanese started buying the full (LPG) cargoes when they got FEI minus mid-single digits,” a market participant said. “Not sure if those were for winter stockpiling or for other reasons.”
Market sources said Japanese buyers are purchasing mainly to cover short positions.
“Heating demand would be most prevalent [for Japanese buyers],” a regional trader said. “I guess [they are] buying if inventory is low, just to keep things running.”
LPG is typically used to adjust the calorific value of city gas in Japan, and the use of lean LNG in city gas requires a larger volume of LPG, Commodity Insights reported Oct. 11.
Japan’s use of LPG for city gas blending has been rising in recent years, mirroring increasing imports of lean LNG from the US.
The Ministry of Economy, Trade and Industry has projected that the country’s LPG demand for city gas usage will grow at an average rate of 2.4% annually, reaching 1.722 million mt by the fiscal year 2028-29 (April-March). This represents a total increase of 12.8% from 1.526 million mt in FY 2023-24. The rise in demand is primarily attributed to the anticipated increase in blending LPG into city gas.
South Korea, China resell cargoes
South Korean and Chinese participants, on the other hand, have been reselling their LPG cargoes, as both do not need LPG for winter heating, according to market sources.
CAS data showed that South Korea loaded 136,000 mt of LPG so far in November, up from 114,000 mt for the whole of October. The bulk of these cargoes were headed for China. South Korea loaded 32,000 mt of LPG for export in November 2023 and 37,000 mt in October 2023.
“The [South] Koreans do not buy LPG for winter, only Japan,” said another trader based in Asia, adding that South Koreans use LNG for heating in winter.
Market sources attributed China’s slowing demand for propane in recent weeks to plant maintenance.
“Poor demand in China [is] due to [the] differential in pricing and PDH [propane dehydrogenation] maintenance, which some had speculated might not start up until the Lunar New Year,” a fourth market source said.
Commodity Insights reported Nov. 15 that at least eight PDH plants may be shut for maintenance out of a total of 30 plants.
Platts assessed CFR North Asia propane cargoes at $622/mt on Nov. 28, up from $617/mt a day earlier, and CFR North Asia butane cargoes at $617/mt, up from $603/mt on Nov. 27.
Source: Platts
