China's domestic LPG prices have firmed after the coronavirus outbreak cut refinery runs

China's domestic LPG prices have firmed after the coronavirus outbreak cut refinery runs, drastically reducing LPG output at a time when easing transportation restrictions have spurred a re-emergence of residential and industrial demand.

 

State-controlled Sinopec's 460,000 b/d Zhenhai refinery in east China raised its LPG prices by 6.5pc to 4,150 yuan/t ($590/t) over 12-19 February. Prices at the firm's 200,000 b/d Qingdao refinery in the region rose by 11pc to Yn4,000/t over the same period. In south China, Sinopec's 470,000 b/d Maoming refinery increased its prices by 8.4pc to Yn4,280/t.

 

Refining crude typically yields 1-4pc of LPG. The average utilisation rate of China's primary refining capacity has fallen to 60pc from 86pc in January, based on latest the Argus survey. But the cut to LPG supplies has been even more pronounced than for other oil products, with some refineries using part of their LPG output to feed crackers or burning LPG as fuel.

 

Chinese refineries cut their utilisation rates amid a backdrop of faltering domestic demand for oil products, as the central government and provincial authorities moved swiftly to stem the spread of the coronavirus by limiting air and road transport.

 

Residential LPG sales at Sinopec's Zhenhai refinery have almost halved from typical levels of about 800 t/d to around 400-500 t/d. In Shandong province, where numerous refineries are clustered, run rates have dropped to below 50pc. And supplies in south China's Guangxi province have been dented by scheduled refinery maintenance. State-controlled PetroChina's 200,000 b/d Guangxi Petrochemical and Sinopec's 100,000 b/d Beihai refinery shut down for maintenance last week and halted residential LPG sales of around 700-800 t/d.

 

The fall in LPG supplies has come at a time when easing transportation restrictions between cities and provinces has boosted demand from areas that were previously off limits. China's transport ministry has announced that national expressways will be toll free from 17 February until the end of the coronavirus outbreak, in an effort to boost road transport and movement of logistics.

 

"Many customers came from Guangxi and Hunan provinces recently, thanks to restored transportation. Refinery volumes are limited, so terminal sales have improved,'' an importer in Guangdong province said. Most terminals have ample supply, although some might face a temporary shortage after having deferred cargo deliveries amid concerns of waning demand.

 

But the demand recovery has been slow. "In normal circumstances, restaurants accounts for over 20pc of LPG demand, and currently restaurants are still closed. Industrial buyers are also absent. The daily sales are only about 50pc of normal levels," a distributor in south China said.

 

Market participants expect residential and industrial demand to return to normal by the end of March, by which time stranded migrant workers will have returned to work.

 

China's transport ministry estimated on 15 February that only 80mn migrant workers had returned to major cities by the first half of February, out of a total of 300mn who needed to return following the lunar new year holidays at the end of January. Another 120mn are expected to travel back in the second half of the month, with 120mn more workers expected to be back at work in March.

 

Source:Argus

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