According to the Commodity Market Analysis System of SunSirs, the LPG (liquefied petroleum gas) market showed a fluctuating upward trend in 2024. Although prices fell during certain periods, overall, prices continued to rise. Taking the civilian LPG market in Shandong as an example, the average price at the beginning of the year was 4960 RMB/ton, and the average price at the end of the year was 5,020 RMB/ton, with a year-on-year increase of 1.21%.
- Review of LPG Market in 2024
Trend analysis by quarter:
Q1: The domestic LPG market showed a narrow range of fluctuations, with limited increase in transaction volume. The overall market is oversupplied, with ample supply from refineries, but limited increase in terminal demand, making it difficult for market prices to rise. The average price for this quarter is 4,939 RMB/ton, a decrease of 271 RMB/ton or 5.20% compared to the previous quarter; A year-on-year decrease of 681 RMB/ton, a decrease of 12.12%.
The demand for component oil raw materials in the northern market is improving, and the price of raw gas is supported by this, showing resistance to the decline of domestic gas prices. In January 2024, the production price of LPG in Shandong was at a relatively high level, at 4,960 RMB/ton. Starting from February, the price gradually decreased, and during April, the decline was more significant, with a price drop of 4,910 RMB/ton.
Second and third quarters: India's import demand is boosted. The increase in India's LPG imports is positively correlated with Saudi Arabia's CP prices, driving up LPG prices and strengthening the market's bullish trend. Despite fluctuations in the crude oil market, the LPG market has performed steadily supported by India's import demand. The reasons for the growth in India's import demand include increased domestic demand, insufficient production capacity, international price advantages, and policy promotion. After entering May, the price began to rebound and reached a relatively high point in June, with a price increase of 5,152 RMB/ton. From July to October, prices once again showed a downward trend, with a significant drop of 4,887 RMB/ton between August and October.
Fourth quarter: Market volatility, alternating supply and demand tension and balance. The cooling weather has led to increased demand, production capacity, and import replenishment, exacerbating price fluctuations. Factors such as international market prices and oil prices are transmitted to the domestic market, affecting the price of LPG. The policy and environmental requirements have increased, and the demand for clean energy from LPG has increased, but the demand structure has changed. The diversification of market competition leads to price fluctuations. LPG prices fluctuated upward in the fourth quarter, influenced by multiple factors. In November and December, prices rebounded slightly, but overall, they are still lower than the level at the beginning of the year, with a rebound of 4,995 RMB/ton at the end of the year.
- Supply Outlook for 2025
Under the dual carbon strategy, the adjustment of energy structure is accelerating, and the trend of "reducing oil and increasing production" is becoming more pronounced. LPG production is expected to increase.
Affected by international oil prices:
The market price of LPG is greatly affected by fluctuations in international oil prices. When international oil prices rise, LPG prices may also increase accordingly; vice versa.
From January to October 2024, LPG production was 45.08 million tons, an increase of 4.6% year-on-year. In the past two years, due to the impact of crude oil lightweighting, the production capacity of main and local refinery reforming units has increased. Due to the widespread demand for LPG chemical industry, refineries have increased their production and export of LPG. From 6.6% of LPG production in 2020 to 7.61% in 2024. In the context of China's dual carbon strategy, the pace of energy structure adjustment will accelerate, and "reducing oil and increasing production" will also become the development direction of the petroleum industry. It is expected that LPG production will continue to show an upward trend.
Distribution of Production in Major Regions
From January to October 2024, the proportion of liquefied petroleum gas production in China was highest in the East China region, accounting for about 54.41%, followed by the South China region, accounting for 17.84%.
Distribution of Production by Region
The top three provinces and cities in China for cumulative production of liquefied petroleum gas from January to October 2024 are Shandong Province, Zhejiang Province, and Guangdong Province, with production of 10.537 million tons, 9.347 million tons, and 5.756 million tons.
Overall Capacity Changes in 2024
There are three sets of refining units planned to be put into operation in China, with a total of 31 million tons of new refining capacity, including an increase of 1.55-2.17 million tons in LPG production capacity. On December 19th, the second phase of Zhenhai Refining and Chemical's expansion plant was put into operation, with an additional refining capacity of 20 million tons and an increase in LPG production capacity of 1-1.4 million tons.
In 2024, multiple sets of refining units are planned to be put into operation in China, including the 10 million ton/year units of Yulong Petrochemical Phase I and Phase II, which have already been put into operation. Zhenhai Refining and Chemical Phase II renovation and expansion facility. The commissioning of these projects has significantly increased the theoretical supply of LPG.
In the next five years (2025-2030), the domestic LPG production capacity is expected to increase by 3.35-4.69 million tons per year. Most integrated refining and chemical plants are equipped with downstream deep processing facilities, and LPG resources are constantly being subdivided and utilized, leading to a continuous increase in chemical demand. It is expected that the circulation of LPG resources in the domestic market may decrease from 2025 to 2030.
Import situation - maintain positive growth
From January to October 2024, the import volume of LPG was 30.23 million tons, an increase of 9.5% year-on-year.
- Demand Outlook and Forecast for 2025
Combustion demand - the proportion of combustion demand presents a structural pattern
In China's LPG consumption, the proportion of chemical applications exceeds that of combustion. Burning consumption accounts for about 40%, and increases in winter due to increased heating demand, leading to an increase in civilian demand. Commercial use is greatly affected by holidays, with a decline after the New Year and a gradual increase before holidays.
Burning consumption is still the basic demand, with seasonal and holiday effects, and has a small impact on price driving.
The chemical end has become a marginal driver of demand, especially for propane deep processing units.
The consumption of LPG in China is showing a situation where chemical industry is greater than combustion. The overall consumption of LPG combustion is shrinking, currently accounting for about 40%. Burning consumption shows an increase in winter heating demand, leading to a corresponding increase in civilian demand.
PDH demand -6 new PDH units to be put into operation in 2024
At present, the total production capacity of PDH devices in China is 37 sets, with a total production capacity of 21.52 million tons.
In China's LPG consumption, the proportion of chemical applications exceeds that of combustion. Burning consumption accounts for about 40%, and increases in winter due to increased heating demand, leading to an increase in civilian demand. Commercial use is greatly affected by holidays, with a decline after the New Year and a gradual increase before holidays. We plan to put 10 sets of equipment into operation in 2024, with a total production capacity of 7.55 million tons. But 6 sets were successfully put into operation, with a total production capacity of 4.25 million tons and a completion rate of 56%.
Demand growth and urbanization process:
Demand growth:
As a major economic province in China, Shandong has seen continuous growth in industrial production and demand for civilian fuel. Especially with the acceleration of urbanization and the improvement of residents' living standards, the demand for LPG in civilian fuel and commercial catering continues to increase. It is expected that its demand will continue to grow in 2025.
At the same time, the demand for LPG raw materials in the chemical industry is also increasing, and production processes such as dehydrogenation to propylene require a large amount of LPG as raw material.
- Supply and Demand Balance and Forecast of LPG in 2025
There is a close correlation between the price of liquefied petroleum gas and international crude oil prices, and the two show a positive correlation trend, that is, as international crude oil prices fluctuate, the price of liquefied petroleum gas will also adjust accordingly. According to predictions from the International Energy Agency and major investment banks, global oil supply will exceed demand by over one million barrels by 2025, which could lead to downward pressure on oil prices. The decline in international crude oil prices will directly affect the price of liquefied petroleum gas. It is expected that the price of liquefied petroleum gas will also be affected to some extent in 2025, and may show a fluctuating downward trend.
Seasonal changes:
The LPG market prices also exhibit seasonal fluctuations. Usually, in winter and spring, due to increased demand for heating and cooking, LPG prices may rise; In summer and autumn, due to relatively reduced demand, prices may fall.
Based on the above data, it is predicted that the future of LPG in 2025 will be summarized as follows:
In 2025, the demand for LPG will undergo structural adjustment, with stable total consumption and positive growth in supply. In the first half of the year, demand may decrease while supply increases, resulting in a fragile supply-demand balance. The uncertainty on the supply side will increase in the second half of the year, and the tension between supply and demand may intensify. The demand gap mainly relies on imports, and it is expected that the domestic LPG price will decrease around the fluctuation of international oil prices in 2025, closely following the pace of imported gas, showing seasonal trend changes. In the first half of the year, it fluctuated downwards, and gradually rose in the second half of the year, with a high level appearing in the third quarter, and the main fluctuation range is between 4,000-5,500 RMB/ton.
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