Harvey puts halt to LPG shipments

singapore — Shipments of liquefied petroleum gas (LPG) from the United States have been held up by the havoc wrought by tropical storm Harvey since last Friday, but Asian buyers are betting the situation will improve before supplies are critically squeezed.

At least 300,000 tonnes in LPG shipments to Asia have been delayed after ports in the US Gulf were shut down, based on the estimates from four sources who buy mainly US cargoes.

Asia is short of LPG, which in the form of butane or propane is used for transportation, heating, cooking and petrochemical production.

Based on IHS Markit data, Asia imported close to 53 million tonnes of LPG in 2016, with about 66 percent coming from the Middle East and 22 per cent from the United States.

Prices reacted swiftly to the US delays, with Saudi Aramco on August 28 setting its September contract prices for propane at $480 a tonne and butane at $500 a tonne. These were up $40 to $60 a tonne from July and also Saudi Aramco’s highest monthly prices since March.

“Middle Eastern players should at the very least be able to sell some additional volumes from stock in the current environment and cash in on the rising price,” said JBC analyst Michael Dei-Michei.

Still, this being an off-peak season for LPG in the heating sector has helped to mitigate the impact, said a North Asian buyer of US cargoes.

“There have been delays in shipments [but] it’s summer now. We do not foresee any worries over inventory shortages,” he said.

Japan, South Korea and China are Asia’s top consumers of LPG. Major buyers include Japan’s Astomos Energy, South Korea’s SK Gas and China’s Oriental Energy.

Another buyer of US cargoes said September inventories were comfortable for now, but that the situation could change. —