China’s LPG Import Costs Rise On Trade War, Iran Sanctions

China’s importers of liquefied petroleum gas (LPG) have started to pay higher prices for procuring the fuel in recent months, as Chinese buyers are looking to source LPG from suppliers other than the United States and Iran, S&P Global Platts reports.

China—which slapped a 25-percent tariff on U.S. LPG in one of the trade tit-for-tat moves at the end of August—has cut off LPG from the United States, which was one of its key suppliers of the fuel last year.

In 2017, the United States was China’s second-biggest LPG supplier, accounting for 19 percent of all Chinese imports, Platts says, quoting data from China’s General Administration of Customs.

According to analysts and traders earlier this week, not a single U.S. cargo of LPG has arrived in China since late August, when the country slapped tariffs on many American products, including LPG.

The 25-percent tariff makes U.S. LPG too expensive, but it also pushes other LPG suppliers in the world to hike their prices, so Chinese propane dehydrogenation (PDH) plants that import LPG are scrambling for alternative supplies and paying higher prices also for non-U.S. LPG, which eats away at their refining margins.

Saudi Aramco, for example, has been raising its propane contract prices, with the October pricing set at its highest level in four years, according to Platts.

China is also a key buyer of LPG from Iran, and it has been buying LPG from the Islamic Republic under term contracts with Iranian exporters, but the volumes in these term contracts haven’t been reflected in public data, industry sources tell Platts.

Iran’s LPG exports are also expected to shrink alongside its crude oil exports as the U.S. sanctions on Tehran’s petroleum sector draw near.

Iran’s loaded and expected to be loaded LPG volumes in September plunged compared to the previous month. In August, Iran’s exports of LPG hit their highest since the previous sanctions were lifted in early 2016, Platts data showed.

By Tsvetana Paraskova for Oilprice.com

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