In the Know: US exports of propane continue to rise

In the Know is a monthly partnership between LP Gas and Propane Resources. Our focus this month is on how the global LPG market affects the domestic propane market, addressed by supply and risk management specialist Jeff Thompson. 

Q What should the U.S. propane industry understand about the global LPG industry?

A The U.S. propane industry needs to understand that a tremendous amount of money has been spent over the past handful of years to move propane out of the U.S. to other parts of the world.

Over the next six to 12 months, the U.S. export market for propane should be robust and steady. With the worldwide shutdown since spring, the U.S. has been able to move propane out of the country as refineries in other regions of the world reduced run rates, which, as we know, means less propane production in those regions.

With the U.S. seeing more propane production coming from natural gas, this puts the U.S. in a great position to export and supplement other countries’ needs as refinery operations run at lower capacity rates.

Globally, China is getting back to pre-COVID-19 economic numbers. With several new chemical plants coming online, the market should see increased need for propane for these plants over the next 12 to 24 months.

The U.S. remains in the position of being an exporter to the world as supply seems to be abundant. With the infrastructure build in the U.S., there is capacity to continue to export and fulfill demand needs in Asia. The arbitrage between the U.S. and Asia remains in good shape, and there is nothing to tell the industry in the near term that the price spread will break down in the next six months or so.

It is more likely as we get past the election season that economic recovery could start to pick up across the U.S. going into 2021. This will impact finished goods imported into the U.S. and propane exported out of the U.S. to make the finished goods.

The global LPG market is active and will likely remain that way over the next 12 months. If the U.S. makes a strong economic recovery, it is likely global LPG consumption will go up, and the U.S. will be feeding a big piece of that consumption.

Jeff Thompson is a supply and risk management expert at Propane Resources. He can be reached at 888-739-6732.