An oversupply in the wholesale LPG market in south China’s Guangdong province eroded profit margins of Guangdong import terminals in the second quarter. Some of them reduced receipts in July as they incur financial losses. The COVID-19 pandemic dampened LPG demand in south China while domestic supplies also increased.
Residential customers started increasing consumption to typical levels during the second quarter, but demand from the commercial sector remained weak. Wholesale LPG demand was about 20% below the typical levels during May-July, a Guangdong terminal operator said. Restaurants in the province saw a 39% year-on-year fall in their revenues over the January-May period, according to Guangdong government data.
Despite weak demand and seasonally warmer weather, seven Guangdong wholesale terminals ramped up their LPG imports in the period, particularly when prices slumped in May. Arrivals of import cargoes to the region increased by about 20% year-on-year to 1.59 million tons, surging by 81% from the first quarter.
Guangdong refineries gradually started ramping up throughput in April as the Chinese economy began a recovery from coronavirus restrictions. LPG output from these plants rose from 324,000 tons in April to 395,000 tons in May and 423,000 tons in June, according to data from China’s National Bureau of Statistics. Most of the additional volumes were sold to the residential and commercial customers, while the rest went to the MTBE and alkylation sectors.
The supply glut during the second quarter meant Guangdong import terminals had to cut arrivals in July as storage tanks were close to the brim. An industry survey showed imports dropped 18% from June to 411,000 tons last month. Regional refinery output also fell amid squeezed profit margins. However, Zhejiang Petrochemical started up its 600,000 tons/year propane dehydrogenation (PDH) unit in mid-July which helped to ease the oversupply.
