Chinese LPG importers are concerned about the possibility that China will reimpose import duty on US LPG after tensions between the two countries over Hong Kong arise. Since March, Beijing allows importers to seek tariff exemptions for importing US LPG as part of the phase-one trade deal, in which China pledged to increase purchases of US products.
However, Chinese market participants fear that Beijing will include US energy products, including LPG in future restrictive policies. To anticipate such change, a major propane dehydrogenation plant operator said that his company had sought more US LPG import tariff waivers. The waivers have made US LPG more competitive in China. Hence, Chinese PDH plants and LPG terminals have boosted purchases of spot US cargoes in recent months.
Customs data showed that China imported 23,177 tons of US butane in March. Total US LPG imports by China reached 251,702 tons or 15% of the country's total LPG imports in April, compared to zero a year earlier. In August 2018, Beijing began imposing 26% for US propane and 28.5% for US butane, prompting Chinese buyers to halt US LPG imports.
Over the last few years, Chinese PDH operators such as Wanhua Chemical and Oriental Energy had diversified their LPG suppliers. Trading sources said Chinese buyers paid $10/ton less for US spot LPG compared to cargoes from the Middle East despite rising shipping costs from the US and Canada. Other suppliers include the North Sea, Africa, and Australia.
If Beijing decided to reimpose tariffs on US LPG, Chinese PDH operators would be forced to be dependent on costlier shipments from the Middle East. OPEC+ oil production cuts have caused limited LPG supply and boosted prices. Saudi Aramco has hiked its propane contract price by $10/ton from May to $350/ton in June, while butane CP was lowered by $10/ton to $330/ton.
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Published on June 3, 2020 6:20 PM (GMT+8)Last Updated on June 3, 2020 6:20 PM (GMT+8)
