[Text/Observer Network Wang Yi] After the US imposed excessive tariffs on all Chinese goods and China took countermeasures, the global liquefied petroleum gas (LPG) market is undergoing a reshuffle. According to a report by Bloomberg on April 23, the high US tariffs have forced Chinese buyers to replace American products with Middle Eastern LPG, and the impact on global LPG trade is becoming apparent.

Anonymous traders who did not wish to be named told Bloomberg that up to seven transport ships carrying American LPG originally scheduled to arrive in China in May and June are now heading to India and Southeast Asia. In exchange, Middle Eastern LPG sold to these buyers will be supplied to China.

Bloomberg reported that in recent weeks, due to the US imposing excessive tariffs, American LPG, ethane, liquefied natural gas, and crude oil exports to China have become focal points. China has already stopped importing liquefied natural gas from the US. For LPG and ethane, given the large export volume from the US and the high demand for these fuels in China, it is expected that the LPG and ethane markets will be hit the hardest.

According to data from the US Energy Information Administration, China is the second-largest buyer of American LPG after Japan. Data from the General Administration of Customs shows that in 2024, China imported 35,682,100 tons of LPG, of which 18,007,700 tons were imported from the US, accounting for more than half.

2024 LPG supply sources for China and India, chart by Bloomberg

Reuters reported on April 21 that Chinese petrochemical enterprises rely on American LPG for their production activities, while there is an oversupply domestically in the US. American oil and gas companies need to sell to China, otherwise the surging inventory of these products may harm their economic benefits.

Julian Renton, an analyst at energy analysis company East Daley Analytics, said that a certain amount of LPG trade can be redirected, "but you cannot shift a daily trade volume of 400,000 barrels to any other market that can receive it."

Drewry, a shipping consultancy, analyzed that China's countermeasures will pose problems for American exports. The expansion plans for American terminals may face delays, and inventory buildup will increase costs, leading to LPG not finding buyers, forcing producers to sell products at low prices or restrict production, which will result in continuous losses for American LPG producers.

A trader and two senior executives of Chinese LPG trading companies stated that the trade conflict has caused the price of Middle Eastern LPG futures arriving in China in mid-May to early June to be $30 to $60 per ton higher than spot prices, compared to the previous level of $20 to $30 per ton.

It is worth noting that during Trump's first term, similar tariff conflicts occurred. Imports of LPG from the US were once interrupted. In 2017, China imported approximately 3.56 million tons of liquefied gas from the US, while the import volume in 2019 nearly dropped to zero, reaching only 0.2 thousand tons. At that time, the main source of China's imported LPG had already shifted to the Middle East.

Shipping company website

Zhuo Chuang Information's analyst Wu Guodong said that the new round of US tariffs may cause another cliff-like drop in China's imports of LPG from the US. China may seek LPG resources outside the US or engage in barter with other countries.

Consulting firm Energy Aspects estimates that sellers in the Middle East will again increase their supply to China, while buyers in other countries such as India, Indonesia, Japan, and South Korea will be able to purchase more affordable American products, and they should all benefit.

However, this also means that global LPG shipping routes will be reshaped. Traders told Bloomberg that changes in shipping routes may lead to an increase in shipping volumes and rising freight rates.

Drewry believes that this development will largely have an adverse impact on the LPG transportation industry, which is already facing overcapacity, bringing一波又一波的uncertainty to the very large gas carrier (VLGC) industry, causing benchmark VLGC spot freight rates to plummet.

Drewry stated that this will not only reduce medium-term demand for petrochemical products but also, in the long run, further suppress demand for LPG and ethane due to increasing concerns about a global economic recession as the trade war intensifies. Profits in the shipbuilding industry in 2025 and 2026 will also be affected.

After the financial markets fell into a slump and the US growth outlook was significantly downgraded due to the tariff war initiated by the US, Trump said at the White House on April 22 that he would not take a "hard stance" against China during the tariff negotiations, hinting that he might "significantly reduce" the 145% mega-tariffs imposed on Chinese imports.

The US media believes that China's non-tariff countermeasures are powerful and forceful, making the US "uneasy." Julien Xu, a senior economist at Natixis' Greater China branch, said, "Ultimately, only when a country has suffered enough self-inflicted damage will it consider softening its stance and truly return to the negotiating table."

This article is an exclusive contribution from Observer Network and cannot be reprinted without permission.

Original: https://www.toutiao.com/article/7496414151426851368/

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