China LPG port flows ease after congestion amid tight controls, military exercises


LPG imports in China have started to resume as ports eased from congestion caused by tighter management of discharging hazardous chemicals during the National holidays, while Chinese military maneuvers in several sea areas disrupted ship movements, trade sources said.

Chinese authorities tighten control of hazardous waste discharge annually during the national holidays, which fell over the first week of October in 2020.

A ship owned by a major Chinese propane dehydrogenation, or PDH, plant operator was heard to have been affected by the military exercises, a market source said.

The congestion was also caused by resurgent import of spot cargoes in recent months as new PDH plants come on stream, following the pause earlier this year after measures taken to contain the COVID-19 pandemic, traders said.

The startup of several new PDH plants has boosted China’s overall LPG imports to 1.92 million mt in August, up almost a quarter from July and 15.4% higher year on year, customs data showed.

Trade sources said Jiaxin port in East China had ships waiting outside the port up till the week ended Oct. 17, though this could be an isolated case, as there are two LPG terminals — operated by Zhejiang Satellite and Zhejiang Material & Products Chemical — at the port.

Very Large Gas Carriers heading to the two terminals can share the same channel. Zhejiang Material & Products’ LPG terminal is currently used by Huachen Energy and Zhejiang Huahong, and sometimes by Shaoxing Sanyuan. Zhejiang Huahong operates a new PDH plant, which started operations in July.

Other than waiting outside Chinese ports, trade sources said some China-bound VLGCs were waiting as far as off Singapore waters during the busy period, though trade sources said this happens occasionally.

Sources said conditions at import terminals have now largely returned to normal, after the Golden Week break, when there was a brief hiatus in imports which allowed for stocks to ease.

Inventory at many terminals are currently at medium levels and deemed healthy, while recent port congestion was not attributed to brimming stocks, Chinese trade sources said. This was unlike in July, when stocks were as high as 85% and caused congestion, before easing to around 64% in early August, sources said.

CHINESE IMPORTS RESUME

Following the holiday lull, Chinese importers were heard to have resumed buying, and traders said that China’s imports for the fourth quarter were forecast at 5.7 million mt, up around 6.8% on the year.

However, traders estimated total 2020 imports at 18.8 million mt, down 1.2 million-1.3 million mt from 2019. S&P Global Platts Analytics had projected full-year imports at 18.5 million-18.6 million mt, about 1.3 million mt lower from 2019, largely due to the effects of COVID-19 control measures earlier this year.

Traders had said that to meet latent demand during the period of congestion, there had been some reselling of cargoes to end-users. This was affected by delays or deferments of US LPG following recent hurricanes, which some estimated at around 20 shipments.

Chinese buyers such as Oriental Energy, were also heard to have taken Middle Eastern cargoes, winning a tender from Qatar Petroleum offering 45,000 mt of propane for Nov. 12-14 loading, FOB.

Chinese and Indian demand, before the recent pause, had pushed the front-cycle CFR North Asia propane price to nine-month highs at $467/mt on Oct. 15, before retreating to $445/mt Oct. 16 on profit taking, S&P Global Platts data showed.

Demand from Chinese PDH plants was supported by profitable processing margins, keeping the average operating rate at 86% in September, and is expected to stay at a relatively high level in October as no maintenance schedules have been heard for the month.

Chinese PDH plants’ theoretical processing margin was estimated at Yuan 1,840/mt ($270/mt) in September, up from Yuan 1,713/mt in August, according to Platts calculations.
Source: Platts



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