India’s LPG market is receiving a lot of attention of late as provisional numbers for December 2017 put the country’s imports to be around 2.4 million tonnes, marginally higher than the 2.3 million tonnes imported by China in the same month. This was the first time that India’s monthly imports were higher than China’s.
What does this mean for LPG shipping?
Despite the noise, India’s total LPG imports in 2017 were substantially lower than China -13.1 million tonnes as opposed to 19.7 million tonnes respectively.
A key factor here is that China has a consumption base which is almost double that of India. Chinese LPG consumption is currently running at an annual level of 44 million tonnes compared with 23 million tonnes for India. As LPG demand in both the countries is set to continue growing, we do not see the import gap narrowing soon.
In shipping market China is a far more important player. China’s LPG import sources are diversified, and the country is increasingly shifting towards US LPG, which generates high tonne-mile demand for LPG vessels given the long haul nature of the trade. In 2017, China imported 66% of its total LPG import requirement from the Middle East and 18% from the US. By contrast, India receives almost 99% of its LPG imports from the Middle East, a short-haul destination that does not create a lot of tonne-mile demand. The Middle East is the preferred source for Indian LPG buyers because (i) the short voyage distance keeps transportation costs down and (ii) Indian buyers prefer a higher proportion of butane, whereas the majority of LPG production in the US is propane.
To conclude, despite the bullish noises coming from the Indian LPG market, China will remain the most influential country in both LPG commodity and shipping market, at least in the medium term.
Source: DrewryPrevious Next
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