LPG prices in south and east China's wholesale markets slid this week, despite stronger crude oil futures at the end of the week, due to a rise in domestic inventories, trade sources said Friday.
Many refineries and LPG import terminals in those regions further reduced prices Friday, ignoring the overnight rally in international crude oil prices.
"We haven't seen any signs that would support an intermediate or longer-term crude price recovery," a trader-based in east China said, explaining why LPG prices didn't follow suit.
In eastern China, prices of both imported and domestically produced LPG fell Yuan 200/mt ($31.26/mt) week on week.
Imported LPG, with a combination of propane and butane, as well as domestically produced LPG traded at Yuan 3,500-3,600/mt Friday, down Yuan 200/mt from last week, local traders said.
They added that the higher inventories led to competition between domestic refineries and LPG import terminals to sell their barrels.
"For LPG import terminals, the current prices are still higher than their import costs, which inevitably encourages them to sell more cargoes in a bid to fix their trading margins," one of the local traders said.
The LPG import cost for August arrivals was estimated at Yuan 3,000-Yuan 3,300/mt, indicating that the domestic LPG import terminals were still enjoying profitable trading margins.
Additionally, the import cost for September arrivals continued to move lower this week to Yuan 2,700-Yuan 2,900/mt, boosting selling interest of import terminals, traders added.
On the other hand, LPG inventories at many local refineries were higher on the back of competitive prices for imported product, traders said.
"The current LPG spot prices are still much higher than the import cost for later arrivals ... It is nearly Yuan 300/mt higher than the trading levels in southern China," another local trader said.
S CHINA PRICES ALSO FALL ON HEALTHY SUPPLY OF DOMESTIC GRADE
LPG wholesale prices also moved lower in south China this week due to a healthy supply of domestically produced LPG, traders said.
Sinopec's 23.5 million mt/year Maoming refinery in Guangdong supplied more LPG for residential use this week, due to less consumption from its own ethylene units, which weighed on prices of domestically produced LPG, according to local traders.
Domestically produced LPG traded at Yuan 3,150-Yuan 3,250/mt in the region Friday, down Yuan 150/mt from last week, they added.
The high stocks at local refineries have encouraged them to lower prices in order to ease inventory pressure.
In south China, imported LPG with propane and butane, traded at Yuan 3,225-Yuan 3,325/mt Friday, down Yuan 100/mt from last week.
"The price drop for imported LPG was less than that for domestically produced LPG as local LPG import terminals have no storage pressure amid limited arrivals this week," a local trader explained.
Only two refrigerated cargoes, totaling 44,000 mt, was recorded to have arrived in the region this week, similar to last week, according to updated shipping data from Beijing-based energy information provider JYD Commodities Hub.
But weak demand and a bearish market outlook continued to dampen buying interest in the region this week, local traders noted.
