China's finance ministry has swiftly approved the bulk of applications made by domestic LPG importers, exempting them from tariffs on US imports amid easing trade tensions between Washington and Beijing.

 

Most importers submitted their exemption requests on 2 March and had their application approved after a day.

 

The approvals are expected to see a boost in Chinese imports of US LPG, especially into east China, where propane-heavy US cargoes will be in demand for propane dehydrogenation (PDH) units clustered there.

 

China imported around 3.54mn t of LPG from the US in 2017, prior to the introduction of retaliatory 25pc tariffs in August 2018. Receipts fell to 1.61mn t in 2018 and zero last year.

 

The increased imports are also expected to reshuffle trade flows that could see more non-US origin volumes from the Mideast Gulf be redirected to Japan and South Korea, currently the main buyers of US LPG in Asia-Pacific, as well as India and southeast Asian buyers such as Indonesia.

 

The re-emergence of US supplies for Chinese buyers is also expected to support the the Argus Far East Index (AFEI), which includes assessments of US-origin cargoes, narrowing its discount to Saudi Contract Price (CP) values for delivery into east China, representing non-US origin cargoes. The premium of non-US origin cargoes to US-origin cargoes was $2/t in January 2018, but widened following China's implementation of its main tariffs in August 2018, reaching around 80/t in January this year.

 

Operating rates at PDH units have been resilient in face of faltering demand following the coronavirus outbreak that led to the shutting of Chinese factories and businesses and restricted transportation. Operating rates in east China were around 76pc this week, falling slightly from 78pc in the week ending 12 February.PDH runs were 84pc before the lunar new year holidays in late January, prior to when the coronavirus outbreak restrictions began.

 

Source:Argus

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