FEATURE: Iran June LPG exports more than halved on month, but latest sanctions impact seen muted

Iran's June-loading LPG exports more than halved from May, but trade sources said the latest US Treasury Department sanctions on Chinese, Hong Kong and UAE firms tied to the producer's petrochemical exports would have minimal impact on Iran-China trade in the coming months.

June-loading LPG exports fell to 386,000 mt from 859,000 mt in May, which were the highest monthly volume since sanctions imposed in 2014 and 2018.

The US Treasury Department on June 16 sanctioned Chinese, Hong Kong and UAE companies tied to Iran's petrochemicals exports to Asia, with links to already-sanctioned Triliance Petrochemical Co. This is for facilitating sales of naphtha, butane, propane, methanol and other petrochemicals, even as US-Iran talks to revive the 2015 Joint Comprehensive Plan of Action have stalled, despite hopes of a deal in early-2021.

The sanctions freeze any assets the individuals or companies have in the US financial system and ban US persons from dealing with Iran, underscoring that Washington will continue to expose the networks Iran uses to conceal sanctions-evasion activities.

Iran has been able to get 60% more of its incomes from oil, gas condensates, natural gas, oil products and petrochemicals in April and May, on the year. Sales of petrochemicals rose to $2.45 billion in the first two months of this Iranian year versus $1.5 billion in the year-ago period, oil ministry news service Shana reported May 29.

This was despite US sanctions blocking ways to access the money and cut off Iran's access to the international banking system, forcing Tehran to use unconventional ways to sell its oil and use the money that has been blocked in bank accounts of customer countries.

Cargoes loading in June lagged the monthly average in the first four months this year, of around 442,550 mt, shipping sources said. However, taking into account the peak loadings in May, shipments in the first five months averaged 525,840 mt, they said.

The monthly average for first-half 2022 is 520,533 mt, according to shipping sources, surpassing the 500,000 mt monthly average needed for whole-year exports to reach the projected 6 million mt.

China's LPG imports from Middle Eastern producers, including the UAE, Oman, Qatar and Saudi Arabia, in May jumped 20.4% on the month and 17.4% year on year to 1.23 million mt, China's General Administration of Customs data showed.

Industry sources said imports from the UAE and Oman -- which the data registered at 860,000 mt, up 23.6% on month -- probably included some cargoes from Iran.

The nine June cargoes of propane and butane included seven loaded from Assaluyeh and two from Siraf port. They are shipped by South Pars Gas Co. or SPGC; Kharg Petrochemical Co., or KPC, PARS, Palayesh Parsian Sepehr and Kangan Petro Refining Co., or KPRC, according to shipping sources.

The cargoes are loaded aboard VLGCs that included Niba, Artemis Gas, Captain Nikolas, Tower Rise, Gas Commerce, Nexo, Gas Gemini, Queen Luca and Sona, according to them.

Limited impact

Regarding the latest US sanctions, three Chinese sources told S&P Global Commodity Insights, they believed there would not be too much impact on trade between the two countries, as Chinese importers could transact on a Chinese Yuan-basis.

In addition, the ships carrying Iranian LPG cargoes were heard to be normally older vessels, many of which did not buy insurance, allowing them to circumvent the US sanctions, one Chinese source said.

Sources said 99% of Iranian LPG exports go to China, facilitated by Chinese shipowners who developed a flotilla of very large gas carriers, or purchased cheap, older vessels since sanctions were imposed in 2014 and then in 2018.

A major obstacle to higher Iranian LPG exports is restrictions that international shipping and trading firms face due to sanctions imposed for the oil producer's nuclear program, sources said.

One source noted that the Chinese entity affected by the latest sanctions is a trading company.

According to the US Treasury Department, the parties sanctioned are Iran-based Marun Petrochemical, Kharg Petrochemical and Fanavaran Petrochemical for supplying products to Triliance; Hong Kong-based Keen Well International and Teamford Enterprises for processing payments and facilitating transactions for Triliance; UAE-based GX Shipping FZE, Future Gate Fuel and Petrochemical Trading, Sky Zone Trading FZE, and Youchem General Trading FZE for concealing shipment details; China-based Jingfeng Gao, also known as Jeff Gao, a broker involved in multimillion-dollar transactions for Iranian petrochemicals; and India-based Mohammad Shaheed Ruknooddin Bhore.

Chinese sources said Iranian LPG was offered at discounts of around $10-$40/mt to the Saudi term Contract Prices, which are deemed attractive to some LPG importers. Prevailing FOB discounts of other Middle East-origin cargoes are around $20s/mt to the CPs, in view of healthy supply in the region, trade sources said.

Discounts

Since sanctions were imposed on Iran in 2014, Chinese buyers have been lured by Iranian LPG offered at discounts of $40-$100/mt.

But some sources said a more realistic level ranged at CP minus $5-$10 to the CPs, CFR China basis, as some vessels were purchased at lower prices, or time-chartered at cheaper rates.

Shrugging off concerns over the latest sanction one Chinese source said: "The US blows hot and cold on sanctioning Iran. This is not the first sanction they imposed on Chinese companies related to the Iran problem. Their recent move is likely just to divert people's attention from domestic inflation."