The era of “easy growth” for U.S. propane exports to Asia is coming to an end, according to ESAI Energy’s newly released Faceoff: U.S. and Middle East Compete for the Asian LPG Market. The report describes that, following the recent export infrastructure buildout, U.S. propane outflows to Asia will confront limited demand in that market and greater competition from the Middle East and its growing surplus.

The report cites China as a key battleground for market share. China’s imports of propane from the U.S. peaked at an average 143,000 b/d in February-April 2016. Then imports fell to an average 103,000 b/d in May-June, 40,000 b/d less. Over the same period, China increased imports from the Middle East by a similar amount, from 213,000 b/d to 261,000 b/d.

“In early 2016, discounted Mt Belvieu propane led to an abnormally high flow of propane from the U.S. to Asia,” says ESAI Energy Principal Andrew Reed. “Since then, Middle East deliveries to China have squeezed out U.S. supply. The pattern in China is indicative of the battle for Asian market share that will play out over the next several years,” explains Mr. Reed. “Regional demand will not grow enough to absorb North America and the Middle East’s growing exports.”

Low exports to Asia are contributing to the unusually big builds of U.S. propane stocks seen in the past few months, according to Mr. Reed. “Since June, U.S. stocks have been building at an average weekly rate of almost 1,700 barrels, 13 percent higher compared to the same period last year. Exports to Asia will only pick up in the fourth quarter when Japan imports more propane to meet its winter heating demand.”

In this outlook to 2020 for the global LPG market, ESAI Energy provides detailed forecasts for global supply and demand of LPG and provides analysis and insight into future market share in Asia, North American export infrastructure and other key developments.
Source: ESAI Energy