The prices of both imported and domestically produced LPG rebounded in East and South China this week, after falling 21-34% over the previous five weeks, supported by increasing demand and improving sentiment, trade sources said Friday, December 26.
In East China, domestically produced LPG was said to have traded at around Yuan 4,150-4,250/mt ($678.26-694.60/mt) Friday, up a sharp Yuan 765/mt or 22% from Yuan 3,385-3,485/mt last week.
Imported LPG was said to have traded at around Yuan 4,600-4,700/mt, up Yuan 650/mt or 16% from Yuan 3,950-4,050/mt last week, local traders said.
The rebound came after LPG prices in East China had fallen Yuan 1,325-1,735/mt or 25-34% over the previous five weeks from November 13, when imported and domestically produced LPG were traded at around Yuan 5,275-5,375/mt and around Yuan 5,120-5,220/mt, respectively, Platts data showed.
"The sharp decline in LPG prices in the past month has encouraged demand for the grade from many aspects recently," a Jiangsu LPG trader said.
"Some refineries and factories that originally used LNG as feedstock have now switched to using LPG as the price of latter is much lower than that of the former," the trader noted, adding the LPG price was around Yuan 1,000/mt lower than LNG on the same calorific value basis.
"Sinopec's Yangzi and Jinling refineries were said have both increased the internal use of LPG to replace the use of LNG, resulting in less supply of LPG to the local market," he said, adding this had cut almost half the two refineries' normal LPG supply to the market.
Yangzi and Jinling refineries offered domestically produced LPG at Yuan 4,150/mt Friday, up Yuan 800-905/mt from Yuan 3,245-3,350/mt a week earlier.
A growing number of petrochemical plants in East China were also said to have resumed operations this week due to positive processing margins, which has encouraged buying interest for feedstock LPG, market sources said.
Petrochemical plants use feedstock LPG to produce MTBE and alkylate, which are blended to produce gasoline.
Stronger demand from household users due to recent lower temperatures was also believed to have also supported LPG prices, market sources added.
"Our sales volume of LPG cargoes increased around 10-15% this month compared with the volume last month, implying stronger demand for LPG from end-users," a third-tier LPG distributor said.
"We expect demand for LPG will increase a further 5-10% next month," he added.
However one local trader said LPG prices in East China may retreat a little in the near term after "surging too far this week."
Several traders said many buyers had held back from buying this week expecting a clearer direction from the international market next week.
PRICES RISE IN SOUTH CHINA ON LIMITED SUPPLY
In South China, prices of both imported and domestically produced LPG rebounded strongly this week on limited supply, local trade sources said.
Imported LPG was said to have traded at around Yuan 4,500-4,600/mt Friday, up Yuan 600-650/mt or 15% from Yuan 3,900-3,950/mt last week, local traders said.
Domestically produced LPG was said to have traded at around Yuan 3,950-4,050/mt, up Yuan 400/mt or 11% from Yuan 3,550-3,650/mt last week.
LPG prices in South China had fallen around Yuan 1,050-1,350/mt or 21-27% over the previous three weeks since November 28, when imported and domestically produced LPG were traded at around Yuan 4,950-5,000/mt and around Yuan 4,900-5,000/mt, respectively, Platts data showed.
"Many LPG sellers, including refineries and terminals, oversold their LPG storage last week amid bearish market sentiment," a local trader said.
"Once the market sentiment turned good and buyers emerged to replenish their stocks, spot supply became limited, though several LPG import terminals in the region have imported arrivals this week," the trader said.
"Besides, they [LPG sellers] are all reluctant to sell much right now as they are afraid that LPG prices might bottom this time," the trader added.
LPG import terminals Guangzhou Huakai, Zhuhai New Ocean, Zhuhai Longhua and Dongguan Jovo were said all have refrigerated arrivals this week.
Many buyers were said have replenished inventories to mid- to high levels this week in anticipation of prices rising further, while others remained cautious, seeking stronger indications from the direction of crude oil price in the coming week, they said.
