Japan has boosted its imports of liquefied petroleum gas (LPG) ahead of the winter season, with deals struck at a discount of $5/t to a premium of $3/t to the Far East Index (FEI) of December. Although these purchases are partly for heating, they are also aimed at covering short positions, according to market sources.
Data from S&P Global Commodities at Sea shows that 801,000 tonnes of LPG were unloaded in Japan in November, up from 883,000 tonnes in October. These volumes are, however, lower than those of previous years. Meanwhile, propane swap prices for December in North Asia fell to an average of $624.50/t in November from $661.34/t in October.
The growing role of LPG in Japanese town gas
Japan uses LPG to adjust the calorific value of its city gas, a process made necessary by the growing import of lean liquefied natural gas (LNG) from the United States. Japan’s Ministry of Economy, Trade and Industry (METI) forecasts a 2.4% annual increase in LPG demand for town gas, reaching 1.722 million tonnes by fiscal 2028 -2029, an increase of 12.8% compared to 2023-2024.
Resale of cargoes by South Korea and China
Unlike Japan, South Korea and China, which do not need LPG for winter heating, are reselling their excess cargo. In November, South Korea exported 136,000 tonnes of LPG, compared to 114,000 tonnes in October, mainly to China. South Korea favors the use of LNG for its winter needs.
In China, propane demand has slowed due to the shutdown of several propane dehydrogenation (PDH) plants for maintenance. Out of a total of 30 factories, at least eight were idled in November, and some may remain closed until the Lunar New Year, according to market sources. Despite this drop in demand, CFR North Asia propane prices increased slightly, reaching $622/t on November 28 from $617/t the day before.
Japan’s strategy for securing its stocks contrasts with that of its neighbors, who favor commercial management of their surpluses.
