Middle East and US to increase export while demand from China and India firm

In 2025, LPG exports from the Middle East and the US are expected to increase. The Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC, or OPEC plus, decided to defer a reduction in the production cut volumes for three months from January 2025 at the ministerial meeting in December. Eight countries including Saudi Arabia are implementing the voluntary production cuts. With the production cuts easing, LPG production is also forecast to rise and exports by Middle East gas producers are anticipated to grow.

In the US, suppliers plan to expand export terminals and LPG exports would likely increase. Passage through the Panama Canal is expected to be smooth in 2025 as well. The water levels are improving and higher than previous years, according to market sources. Auction prices to pass through the canal once soared to $4.00 mil in 2023. But many auctions were awarded in the $100,000's to $200,000 this winter and the canal is not congested.

As for demand, the world largest importer China is procuring low volumes as of December 2024. Demand for feedstock use is sluggish as profitability of petrochemicals worsened. As the price spread between naphtha and LPG does not widen, LPG demand as an alternative to naphtha does not rise.

On the other hand, bullish factors are also observed. In India, demand is predicted to rise in line with an increase in population. In China, several propane dehydrogenation (PDH) plants plan to start up. LPG imports by these countries are expected to rise in 2025 from the previous year. Players should pay attention to movements of President-elect Donald Trump in the US. Trump named an executive of an oil and gas company as energy secretary. Under Trump's administration, crude oil production is expected to rise, which would result in an increase in LPG production. However, since trade friction with Chian worsened under the previous administration of Trump, cargo flow between the US and China might change.

In the Japan domestic market, overtime hours of truck drivers were more strictly restricted, which is called "2024 problem". Due to the restriction, players are still concerned whether enough logistics capacity can be secured to transport necessary volumes. In addition, a rise in transportation costs is not fully passed on to sales prices of LPG as yet and this could be discussed in negotiations for contracts for 2025. For transporting barge cargoes, a shortage of manpower is a more serious matter and some market players were worried that inventories might be used up in the high demand season. In the domestic market, some players pointed out the possibility that the price spread might widen among areas in the wake of a rise in logistic costs.