China’s LPG imports see sharp slowdown after months of robust performance
China’s LPG imports have outperformed seasonal highs most of this year but are slowing significantly in November. Despite new PDH capacity additions, weak margins have capped import growth.
China’s LPG imports have seen remarkable growth in recent years, driven by the rapid expansion of its PDH capacities. Imports reached record highs this July, with volumes staying above the historical seasonal range for most of the first 10 months. However, import sentiments have shifted in November, marking a significant slowdown that is on track to hit a nine-month low and register a year-on-year decline. Rising propane feedstock costs, driven by higher heating demand, are pressuring the already weak PDH margins, potentially weighing on China’s propane imports in the weeks ahead.
Five new PDH plants, with a combined capacity of 3.55 MTPA, have started operations in China this year, with the 660 kTPA Guoheng Chemical PDH plant expected to be the final addition by year-end. These new assets have boosted propane imports and intensified competition, squeezing margins at older, less efficient plants. Some of the existing plants have shut down for a prolonged period, dampening the net increase in China’s LPG imports.
The US-China trade war adds another layer of uncertainty. With China importing over 50% of its LPG supplies from the US this year, any retaliatory tariffs on US LPG imports would significantly impact PDH margins. Limited alternative sourcing options could force several PDH plants to shut down, especially if propylene prices remain weak.
Subdued VLGC freight rates have offered relief to Chinese PDH operators so far. VLGC freight rates have been weighed down by the combined effect of rising tonnage supply and limited tonnage demand growth. This year, 23 new VLGCs joined the global fleet. While US Gulf LPG exports to Northeast Asia have grown, normalized trade flows through the Panama Canal have reduced tonne-mile demand. Unlike last year, Panama Canal waiting and transit times are unlikely to spike, in lieu of adequate water levels at the Gatun Lake.
US Gulf to Northeast Asia VLGC tonne-mile demand (bn tonne-miles, LHS) and LPG trade flows on this route (mbd, RHS)
Looking ahead, the continued rise in US LPG production will drive exports and in turn VLGC tonne-mile demand next year. India’s LPG demand growth is expected to continue, although growth may slow if the government cuts back on subsidies after the election year. New VLGC deliveries are expected to fall nearly 30% year-on-year in 2025 (Braemar), and tonnage supply is expected to remain ample, keeping a lid on VLGC rates.
Read our latest Q4 LPG Special Report here for a full analysis of the global LPG market.
