China’s LPG demand continues recovery

LPG demand has reached 80-90pc of volumes in April 2019, after the lunar new year holiday and Covid-19 outbreak lowered demand in some sectors by 70-80pc.

LPG imports totalled 3.8mn t for January-March, about 83pc of import volumes a year earlier. Import volumes in April stood at 1.5mn t, 100,000t higher than imports in April 2019.

China consumed 48mn t of LPG in 2019, of which residential and commercial demand accounted for 22.8mn t, and the industrial and petrochemical sectors used 24.4mn t, according to data from Sinopec.

Propane dehydrogenation (PDH) capacity rose to 6.7mn t/yr by end of 2019, including the start-up of Hengli Petrochemical's 450,000 t/yr mixed-feed dehydrogenation unit. The PDH capacity stood at 5.2mn t/yr at the end of 2018.

PDH operation rates fell from 84pc in January to around 67pc by mid-March following the outbreak of the virus. But rates picked up as economic activities resumed and reached 97pc in the first week of April.

Domestic propylene prices surged in the first week of April, bolstered by gains in polypropylene (PP) futures and physical markets amid strong demand for fiber grade PP used in the production of face masks.

Three new PDH projects are scheduled to launch in May and June amid high domestic propylene prices.

Zhejiang Petrochemical's 600,000 t/yr PDH project is set to come on stream at the end of May, which will consume about 60,000 t/month of propane at full capacity. But the start-up is not expected to increase propane imports as a lack of refrigerated storage capacity means all its feedstock needs will be supplied by its upstream refinery.

Chinese private-sector firm Huahong New Material is also planning to start up a new PDH unit with 450,000 t/yr nameplate capacity by mid-May. The unit will be located in Jiaxing, east China's Zhejiang province.

Fujian Meide plans to launch its PDH unit in the second quarter of 2020. The company last week purchased a 23,000t propane cargo, suggesting that its 660,000 t/yr capacity unit is likely to start up in June.

China's PDH plants imported 1.67mn t of LPG for the first quarter of this year, steady from imports over the same period last year, even as 1.05mn t/yr of additional capacity came on line between the second and fourth quarters of 2019.

LPG imports by PDH plants in April surged to about 685,000t, up by 15pc on the year, and up by 23pc from the monthly average in the first quarter of 2020, reflecting greater demand this month.

But some PDH capacity remains idled amid unexpected shutdowns. Private sector firm Wanhua Chemical on 13 April initiated an unplanned shutdown of its 750,000 t/yr PDH unit because of mechanical problems. The closure is expected to last two weeks. Tianjin Bohua earlier this month began an unplanned shutdown of its 600,000 t/yr PDH unit. It remains unclear when it will restart.

Commercial and residential demand for wholesale LPG has returned to normal in south China, but industrial demand remains weaker than usual as business orders decline, especially from customers in Europe and the US who are grappling with the virus, an LPG importer in south China said.

Seven terminals that supply LPG to the wholesale market in Guangdong province imported 189,000t of LPG in February, about 45pc of volumes in February 2019, according to ship tracking data. But imports are estimated to return to 509,000t by the end of this month, about 94pc of import volumes in April 2019.

But demand from the wholesale LPG market is not expected to continued recovery at the same pace. Warmer weather is expected to lower consumption by 10-20pc, and opportunistic buying amid low contract price (CP) values in April is also expected to subside, with expectations that the May CP prices will be set higher.