China is set to play a growing role in the global LPG trade on the back of its increasing use of the product as a petrochemical feedstock.
Chinese imports reached a record 24.5m tonnes in 2021, accounting for 22% of seaborne LPG imports globally, according to Clarksons.
It said Chinese seaborne LPG imports have grown by a compound annual growth rate of 21.8% since 2011, accounting for 41% of global LPG trade growth.
“LPG in China has historically been used as a heating fuel, however, its growing use as a petrochemical feedstock has largely driven import growth over the last decade,” the shipbroker said.
The share of China’s LPG consumption in the chemical industry has grown from 13% in 2011 to about 47% in 2019.
“Following the US shale revolution around 2012, the supply of LPG increased notably and prices dropped, increasing the attractiveness of LPG as a feedstock and encouraging the construction of propane dehydrogenation [PDH] plants,” Clarksons said.
“These plants use LPG to produce propylene, whereas traditional petrochemical plants use naphtha. Furthermore, PDH plants typically use high-quality imported LPG, with the share of imports in total LPG consumption rising from 14% in 2011 to 34% in 2021.”
Shipments of LPG into China grew firmly in 2021 on the back of PDH capacity expansions and recovering demand following Covid-19-related disruption, the broker said.
Despite cooling economic trends amid Covid-19 outbreaks, Clarksons said Chinese LPG imports have performed well, growing by 5.3% year on year in the first four months of 2022.
“Imports have grown on the back of recent PDH start-ups, while attractive propane-naphtha spreads have encouraged flexible petchem crackers to use LPG as a feedstock over naphtha,” the broker said.
With 12.2m tonnes per annum of PDH capacity expected to start up across 2022-2023 and other positive drivers including “smart grids” to help LPG reach more rural households, the short-term outlook for Chinese imports appears positive.
“Although there are some headwinds for import growth, including macroeconomic pressures, Chinese imports are projected to grow by 11% to 27m tonnes this year and by 7% in 2023, with China expected to account for 50% of global LPG trade growth in 2022-2023,” Clarksons said.
