This current feature was extracted from the latest edition of Poten’s LPG in World Markets, a monthly service published on September 8, 2023.
Chinese LPG imports were up 22% to about 18.5 MMt in the first seven months of 2023 with monthly imports staying above 3 MMt/m since hitting a record 3.28 MMt in May. Year-to-date, five PDH plants have started operations, adding approximately 3 MMt/y of combined on-purpose propylene production capacity, driving demand for feedstock propane.
However, LPG imports into China are expected to soften in the near term from previous record highs due to higher feedstock prices and a sluggish downstream market, which has crippled margins in recent weeks. Four PDH units were reportedly down in August for maintenance, reducing average run rates – three more units are scheduled for turnarounds in September. Inventories are also high now following strong import growth in the past few months.
Chinese LPG Imports by Source
China’s LPG imports have stayed comfortably above the 3 MMt mark for the months ensuing a record high of 3.28 MMt set in May 2023, according to Chinese customs statistics. Imports of LPG for June 2023 were registered at 3.24 MMt while imports for July stood at 3.11 MMt.
Cumulatively, Chinese LPG imports stand at approximately 18.48 MMt for the first seven months of 2023, up 22% from 15.22 MMt registered for the same period in 2022.
Strong import volumes over the past few months can be attributed to the commissioning of several new PDH plants, as well as higher operating rates at existing PDH plants. According to data provided by OilChem, overall PDH plant operating rates have steadily increased from a year-to-date low of 54% in early-March 2023 to around 83% in mid-June 2023. Run rates subsequently dipped to 69% by mid-July but quickly rebounded to mid-80% levels by early-August.
A total of three PDH units have started operations during June-July 2023, which lent support to LPG demand and imports. The first was Grand Resources unit No. 2 located in Dongguan, Guangdong province. The plant has an installed propylene production capacity of 600,000 t/y.
The subsequent two start-ups were Befar Chemical’s 600,000 t/y plant in Binzhou, Shandong province, which came into service in early-July 2023, and Huahong Petrochemical’s second unit in the Jiaxing, Zhejiang province which came online in end-July 2023 with an installed propylene production capacity of 450,000 t/y.
Year-to-date, five PDH plants have started operations, adding approximately 3 MMt/y of combined on-purpose propylene production capacity. However, LPG imports into China are expected to soften in the near term from previous record highs due to higher feedstock prices and a sluggish downstream market which has crippled margins in recent weeks. Available shiptracking data shows imports into China dipping to around 2.9 MMt for August 2023.
The FEI benchmark for propane has risen by 47% from $470/t pmt in mid-June 2023 to $692.75/t as of Sep 5, 2023, due mainly to tight LPG availability in the Middle East followed by a rally in the broader crude market. However, downstream product prices have not kept pace with feedstock costs, prompting margins to dip into negative territory.
This has prompted several operators to reduce their run rates, or even shut down plants, in response to negative margins.
Share of Chinese LPG Imports
BAccording to OilChem, average Chinese PDH operating rates hovered around 70%-72% during the second half of August 2023, a sharp dip from 85% recorded during the first decade of August. Four PDH units were reportedly down in August – the 750,000 t/y unit operated by Wanhua Chemical, Fujian Meide Petrochemical’s 660,000 t/y unit, the 300,000-t/y unit operated by Shandong Ruize Chemical and Befar Chemical’s 600,000 t/y plant.
Additionally, three more PDH units are scheduled for turnarounds in September. According to market reports, Liaoning Kingfa plans to take its 600,000 t/y unit offline for maintenance. Dongguan Grand Resources’ unit No.1 (600,000 t/y) and Zhejiang Shaoxing Sanyuan Petrochemical’s PDH unit (450,000 t/y) also have plans to close for turnarounds.
The start-up date of Oriental Energy’s 600,000 t/y PDH plant in Maoming, Guandong province has been pushed back several times, with no clarification made on its commissioning date at the time of writing. Formosa Plastics has also pushed back the start-up date of its 600,000-t/y plant in Ningbo, Zhejiang province, from Sep 2023 to Oct.
An additional eight PDH plants (including Oriental’s and Formosa’s units) with a combined propylene production capacity of 5.7 MMt/y are scheduled to come online during the remainder of 2023. However, industry sources indicate that many of these plants are expected to be pushed back to 2024 due to the current lackluster macroeconomic environment in China. Moreover, strong import volumes of LPG into China over the past several months have driven up inventory to its highest levels since 2019. As such, petrochemical players are expected to focus on drawing down stockpiles and utilizing feedstock from domestic refineries to manage costs, effectively putting a cap on import volumes in the coming months.
With regards to sources of imports, the Middle East remains the largest supplier of LPG to China, accounting for approximately 53% of total imports during Jan-Jul 2023, up from the 52% registered for the same period last year. Across the same period, the second largest import source, the US, saw its contribution in total Chinese imports increase by five percentage points to 40%.
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