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Iranian LPG loadings almost grind to a halt in Nov after new US sanctions: sources

Singapore — LPG loadings from Iran in November have almost ground to a halt following the re-imposition of US sanctions on November 4, with the initial shipping program showing only one vessel slated to lift a cargo, shipping and trade sources said this week.

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The cargo is due to be lifted by Chinese trading company Pacific Petrochemical, and is likely to be delivered to China, sources said. The company could not be reached for comment, and the vessel name was not immediately known.

Ahead of the sanctions, Iranian LPG shipments have been declining for two straight months.

In October, shipments fell to 370,400 mt from 524,000 mt in September, which was a drop from August volumes when loadings hit 568,000 mt -- the highest since previous Western sanctions for Iran's nuclear plan were removed in January 2016, fixtures from shipping sources showed.

Iranian shipments in the first 10 months of this year totaled 4.602 million mt, most of which were destined for China, largely to meet growing demand for propane dehydrogenation, according to shipping sources.

"It's a tough situation not only for Iranian suppliers but to all receivers who had purchased Iranian cargoes," one market source said, adding that Iranian suppliers will in all likelihood find solutions and move the cargoes.

Even as US sanctions against Iranian crude exports snapped back into effect, top buyers of Iranian crude, or up to eight countries, were given temporary waivers until May 2019, when they will be expected to cut purchases significantly.

A source briefed on the exemption given to China said it included "a lot of different items" other than oil and condensate, but was unclear if LPG was on the list.

Hopes that the waivers would include LPG and uncertainty if LPG was included in the list of products sanctioned, had stirred interest among some Chinese importers, leading to increased inquiries for Iranian LPG, a trade source in East China said.

Officials at South Korea's Ministry of Trade, Industry and Energy, as well as foreign ministry, said LPG was not discussed among the waiver items and they did not seek a waiver for Iranian LPG. The focus was on condensate imports, they said.

A check with Korea National Oil Corp., or KNOC, showed South Korea has not imported Iranian LPG. South Korea imported very small volumes of Iranian LPG some years ago, comprising 81,000 barrels in 2017, 297,000 barrels in 2016 and 1.48 million barrels in 2015. Most of South Korea's LPG imports come from the US.


After the last EU sanctions were imposed in July 2012, which banned the provision of insurance for oil tankers by EU-based insurance and re-insurance companies for moving Iranian oil cargoes, Tehran has been using its own vessels, or time-chartered ships, to export crude and fuel oil.

This extended to LPG when Chinese importers started building up their own VLGC armada that enabled them to gradually ship Iranian LPG, especially after June 2013.

Movements of Iranian LPG to Asia became more frequent after Western sanctions were lifted in mid-January 2016, mainly to China but also to Indonesia, South Korea, Thailand and Taiwan, shipping sources said.

Apart from the availability of Chinese ships and access to Iranian insurance cover, Iran was able to move cargoes when the previous sanctions were in place due to the steep discounts to the Saudi Contract Prices that Iranian suppliers offered to buyers, sharper than those offered by other Middle Eastern producers.

Trade sources said that Iranian cargoes had been at discounts as deep as $40-$50/mt to the Saudi CPs, on an FOB basis, when the past sanctions were in force over 2014-2015. But soon after the sanctions were scrapped, discounts started narrowing to $10/mt and prices gradually came in line with the rest of the Middle East FOB market, sources said.

A market source familiar with the matter said Chinese buyers are expected to continue to buy from Iran, adding it is possible that Iranian suppliers would again resort to offering discounts as they did before as a strategy to attract buyers.

"They [Chinese buyers] have no issue working with Iran. China decreased imports but did not stop," the source said.


--Edited by Geetha Narayanasamy,