Straight from NGL Summit to you, select a topic below to get the summary:
Chinese PDH Growth in Focus for 2024 as Petchem Margins Falter
Jones company.
Speaking Wednesday at the OPIS NGL Summit in Las Vegas, Theo said that demand from China is "very resilient. The market is just resilient."
Theo said seven new PDH units, with up to 4.56 million mt/yr of new propylene capacity, and four new crackers (9.21 million mt/yr ethylene and 1.97 million mt/yr propylene) are poised to come online in 2024. He noted that most projects have a disclaimer saying market conditions could delay their ultimate timing.
This will follow the addition of 3 million mt/yr of propylene capacity through five new PDH units and 2.99 million mt/year of ethylene and 380,000 mt/yr of propylene capacity via five new crackers, each in 2023, Theo noted.
The overall growth in U.S. LPG exports and lower Mont Belvieu propane and butane prices have contributed to supply length in Asia of late. Theo noted that U.S. exports have jumped 19.4% between 2022-2023, while Mont Belvieu propane prices fell 35% and butane came down 31.2%.
"Supply is still looking to be quite long in Asia," Theo said. "It's about finding the places where [U.S.] cargoes can flow into, and Asia is one of those places."
While the United States exports more LPG to Japan than to China, from a global perspective China is still the largest importer of LPG in all of Asia. Its intake rose to 32.21 million mt in 2023, up 21% from 2022's 26.60 million mt,
Theo said, citing customs data.
In fact, since 2013, there has been just one year that imports into China fell, and that was following widespread Covid-19 lockdowns in 2020.
While much of China's most recent growth stems from the startup of new PDH plants and crackers, there is also pent-up, post-Covid demand from the retail sector as well, Theo said. Between 2019-2021, Chinese LPG imports ranged from 19.58 million-24.49 million mt annually.
Theo said this trend could continue for the foreseeable future. "There is no looking back for them," he said on China's LPG import growth.
Global LPG imports into Japan, on the other hand, fell 2.3% between 2022-2023, while South Korean imports tumbled 7.4%.
And cracking demand in these countries could face continued margin constraints in 2024. CFR Japan propane prices fell 9.8% to $640.44/mt in December 2023 from $709.96/mt at the start of the year, and "overall demand [is] still hampered by negative margins," he said.
Northeast Asia did see a brief period toward the end of 2023's second quarter where petrochemical margins turned positive, driving an overall increase in cracking volumes year on year.
"However, most market participants remained cautious, [and] full demand recovery from the petchem segment [is] still not in sight for 2024," Theo said.
--Reporting by Jessica Marron, jmarron@opisnet.com; Editing by Alan Lammey, alammey@opisnet.com
Clean Energy Transition in Latin America Must Include LPG
Liquefied petroleum gas has a large role to play in decarbonization efforts and a clean energy transition in Latin American countries, according to Adrian Calcaneo, vice president of energy and feedstocks with Chemical Market Analytics by OPIS.
Speaking Tuesday at the OPIS NGL Summit here, Calcaneo said even in a case involving aggressive decarbonization efforts across the globe, LPG demand in Latin America is expected to grow into 2050 and beyond.
At present, this part of the globe is highly reliant on LPG for both residential and petrochemical needs, he said. Where other areas of the world typically consume approximately 18-20 kilograms per person of LPG for residential needs, this figure exceeds 50-60 kilograms per person in countries such as Ecuador, Belize, Puerto Rico and Chile.
And with half of all LPG consumed in Latin America coming from the United States, "we are tied at the hip to the U.S.," Calcaneo said.
Calcaneo said the ideal goal of a clean energy transition should be to move residents from burning dung, farm waste, firewood, charcoal and kerosene up a ladder to cleaner sources such as LPG and natural gas, followed by electricity and electricity generated from renewable sources.
But in Latin America, this has instead forced many residents back down the ladder due to higher costs to obtain clean energy, he said, noting that upwards of 2.6 billion people in this part of the world are still cooking with firewood. Here, the energy transition is "not getting people to drive electric
vehicles," but should instead focus on bringing more residents to LPG, Calcaneo said.
While overall LPG imports remain steady, Latin America is no longer the primary destination for U.S. supply. Following the shale revolution and subsequent bounce in supply in the 2010s, the Asia-Pacific region has become the primary focus of U.S. LPG exporters, he noted.
LPG demand in China alone, Calcaneo said, equals that of all Latin America, and Asia is "adding demand the complete size of Brazil every year."
In terms of pricing, "it all comes down to what happens on the U.S. Gulf Coast," he added. "What happens in the U.S. Gulf Coast sets the price [of LPG] around the world."
Calcaneo forecast relatively limited changes in U.S. NGL pricing through 2025, as U.S. gas and oil production is likely to keep ramping up, while Asian petrochemical demand stagnates.
He predicted propane prices should hover in the 70-80cts/gal range through 2025, with normal butane running right around $1/gal. Ethane, meanwhile, was seen around 20-30cts/gal over this period.
--Reporting by Jessica Marron, jmarron@opisnet.com; Editing by Michael Kelly,mkelly@opisnet.com
Europe Faces Stiff Asian Competition as LPG Needs Grow
European markets are likely to rely increasingly on imports of LPG from the U.S., all while facing tough competition from the Asian petrochemical sector for market share, according to Jamie Aldridge, OPIS senior analyst of LPG, naphtha and gas freight.
Speaking Monday at the OPIS NGL Summit here, Aldridge said there is much more pressure on the U.S. to meet a shortfall in propane and butane supplies resulting from a ban on Russian imports into Europe.
And with U.S. LPG production estimated to rise by about 4% year to year, that could prompt European markets to "nudge toward the U.S. for more product," he added.
Freight rates and arbitrage values, both to Europe and to Asia, will be key figures to watch in 2024. In addition, Asian petrochemical demand will be a major determining factor in global LPG export flows in the year ahead, he noted. Propane dehydrogenation margins in the East have been negative since
2021, he said, but additional PDH capacity is poised to come online in the year ahead in China.
At the same time, petrochemical margins in Europe have also been challenging due to higher power costs and dwindling downstream demand, Aldridge said. So far, this has hit naphtha-fed crackers the most, with this sector seeing extended shutdowns at numerous units.
While much of the global export talk has surrounded the Asia-Pacific as a major future consumer of U.S. LPG, conditions may flip more in favor of a European destination market if the Panama Canal faces similar delays as it did in 2023, Aldridge noted.
Due to a widespread drought, delays to transit the Panama Canal were rampant last year, resulting in difficulties sending U.S.-origin VLGCs to Asian markets. However, this resulted in more U.S. cargoes on offer into Europe in the fourth quarter, he said.
Outside U.S. export dynamics, Aldridge suggested that North Sea LPG exports may become easier to come by in the year ahead for European LPG consumers.
"The price of natural gas in Europe has fallen considerably, broadly equal to propane and butane," Aldridge said. "This has recently prompted North Sea producers to reduce the amount of LPG re-injected into natural gas and return it to the export market."
--Reporting by Jessica Marron, jmarron@opisnet.com; Editing by Michael Kelly, mkelly@opisnet.com
