US LPG arrivals to Asia in Dec to be around 2.7 million mt: traders

Singapore — US LPG cargoes due to arrive in Asia in December are estimated at around 2.7 million mt, traders said.

This initial projection is slightly below November arrivals of around 3 million mt, which was revised from earlier estimates of 2.1 million mt.

US cargoes are propane-heavy, with butane normally making up 20% of the volume, some sources said. Other sources said US shipments can also comprise evenly-split cargoes, or 33,000 mt of propane and 11,000 mt of butane.

While it might be possible for US exporters to load full butane cargoes, exporters would need to evaluate if Asian importers need such full cargoes, rather than mixed propane/butane parcels, a source said.

US NGL exporters Enterprise Products Partners and Targa Resources have been expanding their butane loading rates since starting to ship mixed propane/butane cargoes around March 2015 through February-March 2016 from their Mont Belvieu terminals in the US Gulf.

"Full butane is not standard ratio, I feel, and importers are not willing to take such cargo," a North Asia trader said.

"It seems that in the current arbitrage, propane is better than butane, so, butane portion should be low."

Major Asian buyers such as India and Indonesia are key consumers of butane used as cooking fuel, though they normally buy mixed propane/butane cargoes in the ratio of 50:50, 70:30 or 30:70.

Japan and South Korea buy propane-heavy cargoes used for heating and occasionally as petrochemical feedstock, while China buys propane-heavy cargoes as feedstock in propane dehydrogenation plants and for residential use.

Japanese brokerage Ginga Petroleum said in August it will not include butane from the US as an acceptable point of origin for the Ginga LPG Forward Terms 2021 following a final vote by 12 trading houses.

Asian traders said importers have not received a lot of butane from the US and they need to do more checks on specifications for volatility. The market also needs another two to three years to gather more evidence on the stability and quality of the product for use in the petrochemical, commercial and household sectors in Asia before US butane could be accepted, traders said.

Prices of butane in Asia have been above propane since turning to a premium early September, while prior to that butane had been at a discount to propane for some four months, S&P Global Platts data showed.

Butane was indicated at a premium of $13/mt to propane early Nov. 18, according to brokers, widening from $12/mt seen over the past week.

Ample propane for North Asia demand

Sources said while India has not sought spot cargoes for end-year delivery, state-run buyers might be seeking earlier loading dates for term butane and mixed cargoes from Middle East suppliers, which could tighten butane availability, keeping butane at a premium to propane.

Ample US propane supply has been meeting healthy demand from Chinese PDH plants and winter demand in North Asia. Some such as Oriental Energy had sold spot propane in the Asia physical market this week, along with South Korean trader E1 Corp.

This is keeping CFR North Asia second-half December delivery prices at $455/mt on Nov. 17, down $8/mt day on day, Platts data showed.

The premium of H2 December propane to the December Contract Price fell $5/mt on the day to $10/mt on Nov. 17, while FOB Middle East differentials have been hovering at high single- to low double-digit discounts to Saudi Contract Prices.

The spread between December Argus Far East Index propane -- indicating CFR cargoes -- and the Saudi CP swaps, narrowed to plus $3/mt on Nov. 17, from plus $10/mt on Nov. 3.

"If the FEI/CP narrows, it would also put pressure on FOB," another Asian trader said.