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Global propane prices

Asia-Pacific propane prices fell sharply despite largely stable crude values. The Argus Far East Index (AFEI) settled at just over $600/t at the end of December, down 10pc from the end of November, despite the onset of winter. Cash premiums for propane cargoes delivered to Japan in the second-half of January averaged $15/t against the January AFEI.

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LPG versus naphtha

Negative cracking margins capped demand for LPG despite steep discounts offered against naphtha. Month-2 AFEI propane swaps averaged a $30/t discount to its naphtha equivalent, but demand from northeast Asian ethylene makers for January shipments was muted amid weak downstream yields.

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Saudi Aramco posted propane & butane CP

Saudi Arabia’s state-controlled Saudi Aramco slashed the January propane and butane Contract Prices (CP) by $60/t and $45/t, respectively, from December to $590/t and $605/t. Limited butane inflows from the US owing to increased domestic demand had rendered arbitrage economics unworkable. Asian buyers turned to Mideast Gulf producers for supply of evenly-split ratio cargoes, which boosted spot differentials to $14.5/t discounts to the January CP.

After soaring to a record high of $148/t on the Ras Tanura-Chiba route, freight rates for VLGC averaged $134.5/t in December as strong demand for Mideast exports kept vessels employed.

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Chinese PDH performance

Average operating rates at Chinese PDH producers slipped to 72pc at the end of December, compared to 77pc a month ago. PDH margins recovered to negative $25/t on 21 December after propane feedstock prices fell relative to downstream yields.

The end of zero Covid-19 curbs in China is expected to boost demand for polyolefins as manufacturing of consumer durables resumes.