June 22, 2020 [S&P Global Platts] – China’s LPG terminals and storage tanks are still brimming with supply even though port congestion has eased after imports resumed in late March with the end of lockdown measures to control the COVID-19 pandemic, trade sources said June 16.

 
Tight storage availability is slowing China’s resurgent imports, which have been spurred by the resumption of cheaper US LPG inflows via an approval process for exemptions from high import tariffs.

At least one major Chinese importer, PDH plant operator Oriental Energy, had even offered to sell cargoes in the Asian market to help draw down high stocks, traders said, adding such moves have started to ease the congestion at ports seen since H2 May.

“Although vessels which were waiting at some ports have been gradually cleared, inventories at many terminals and storages are still very high,” a source in east China said.

Another Chinese source said the tank-top situation might last till end June, adding this would slow down imports.

To ease oversupply, importers have turned away cargoes from Iran, which had accounted for about four to nine cargoes each month into China in recent months, sources said.

Three LPG vessels were heard to have arrived at Dongguan JOVO’s terminal in southern China almost simultaneously in early June, resulting in congestion at the terminal, local sources said.

“The last vessel began to unload from Thursday [June 11] after waiting at the port for more than 10 days,” one local source said.

Oriental Energy was heard to have also faced port congestion at the end of May, with several LPG vessels waiting to discharge at the port at the same time. “But these vessels have all finished discharging,” the local source said.

Both Oriental Energy and JOVO were not available for comment.

China is estimated to have imported a record high 2.05 million mt of LPG in May, shipping data from domestic information provider JLC showed. This was the highest since October 2018, when China imported 2.01 million mt of LPG, customs data showed.

LOWER IMPORT COSTS

Market sources said lower import costs spurred Chinese imports in May, leading to full tanks and port congestion.

Saudi Aramco set its April propane contract price at $230/mt, almost halving from $430/mt for March and the lowest in around 17 years, Platts data showed. The propane CP rebounded to $340/mt for May and $350/mt for June, S&P Global Platts data showed.

Asian spot refrigerated propane cargoes dropped below $200/mt in late March on a delivered basis, the lowest in more than 13 years, according to Platts data, amid abundant CFR supply from the west.

“The low import cost was believed to have encouraged many terminals and PDH plants to pile up their inventories in the past two months, though everyone knows seasonal demand turns weak in summer,” the source in southern China said, adding that the brimming tanks might discourage buying interest for June or July arrivals, as it was expected to take some time for terminals to digest their high inventories.

A trade source in southern China said the robust buying interest in the past two months had also prompted a brief price recovery in Asian spot market; CFR North Asia propane rebounded 94% to $364.50/mt on April 20 after touching a more than 13-year low of $187.5/mt on March 23, Platts data showed. However on June 12, Platts assessed CFR North Asia propane at $304.50/mt, a one-month low, in the face of ample supply from the Middle East and US and tepid regional demand. Prices were last assessed June 15 up $3/mt from the previous session at $307.50/mt.

As a result of the ample supply, the price of imported LPG in east and south China has dropped to around Yuan 2,500-2,800/mt in H1 June and Yuan 2,800-3,000/mt in May from Yuan 3,700-3,800/mt in mid-April, according to data from JLC.

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