Chinese plastics plants are turning to the Middle East for LPG to replace tariff-hit imports from the US, causing disruptions in global flows and boosting freight rates. Persian Gulf producers like Saudi Aramco are accommodating these requests.
Seven supertankers carrying US LPG to China in May and June will now be redirected to India and Southeast Asia, while Middle Eastern LPG shipments intended for those regions will be rerouted to China.Aramco did not respond to Bloomberg’s inquiries. US-to-China LPG, ethane, LNG, and crude oil flows have been affected by tariffs, with LPG and ethane seeing the most impact due to high US exports and China’s demand for plastics production. Chinese factories risk closure if feedstock supplies are insufficient.
Despite potential Middle Eastern supply, China faces an LPG shortfall of 470,000 tons per month. If tariffs persist, PDH plants operating at a loss may reduce activity below 65%-70% due to dwindling feedstock inventories.The rerouting of LPG flows has increased ton-mile activity for gas carriers, causing freight rates to rise, including those from the US Gulf Coast to Japan and from the Middle East to Japan.
However, Chinese buyers may find Middle Eastern supplies less ideal than US shipments, as they often include both propane and butane, while Chinese plants prefer 100% propane for plastics production in PDH plants.
