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China Gas To Boost LPG Imports Threefold

China Gas plans to increase its annual imports of liquefied petroleum gas from 2.8 million tons to 10 million tons during the next five years as it enters the petrochemicals industry, S&P Global Platts reports, quoting industry sources.

The company’s plans also have to do with higher demand, with LPG sales to households forecast by China Gas to increase from 4 million tons in financial 2017/18 to 4.5 million tons in the current financial year, and further to 5 million tons in financial 2019/20.

How much of this increase in imports will come from the U.S., a major LPG supplier to China, remains to be seen and depends on the outcome of the trade war between Washington and Beijing.

For now, to meet this higher demand and pursue its petrochemical plans, China gas will increase its shipments from the Middle East, notably Kuwait and Qatar, the sources said. Yet, they added, the company could meet some of the rising domestic demand for LPG with shipments from the United States if the trade war gets resolved quickly.

U.S. propane and butane, collectively known as LPG, accounted for some 19 percent of Chinese LPG imports in 2017 and made China the third-largest buyer of U.S. propane after Japan and Mexico. Most of this went into propane dehydrogenation plants, whose owners commonly use term supply contracts, but Platts’ sources said China Gas will likely use FOB contracts with Kuwait and Qatar for future deliveries.

First-quarter import figures reveal that the value of U.S. LPG imports into China was more than US$2.6 billion, with most of this coming from propane imports.

After the latest round of U.S. tariffs on Chinese goods worth US$16 billion, China responded in-kind, slapping sanctions on goods with an equal value, including in the list LNG, LPG, naphtha, and coal.

Even before that, however, Chinese buyers of U.S. LPG began reducing their orders, S&P Global Platts reported earlier this month, citing market sources as saying shipments of U.S. propane and butane began falling in March.

By Irina Slav for Oilprice.com

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