The domestic LPG market in March was primarily driven by geopolitical tensions in the Middle East, leading to a significant overall price increase. Residential gas, ether-based C4, and propane all exhibited wide fluctuations with an upward trend, resulting in a notable rise in the price center. Downstream industry performance varied: alkylation and isobutane dehydrogenation units saw reduced losses or even turned profitable, while PDH unit profits continued to deteriorate. Looking ahead to April, crude oil is expected to remain volatile at high levels, and domestic LPG supply is anticipated to stay tight. However, with demand entering the off-season and the potential for eased tensions in the Middle East later on, the market is projected to follow an initial rise followed by a decline.
Middle East tensions drove a substantial increase in domestic LPG prices. Throughout March, the domestic liquefied gas market experienced significant fluctuations, showing a pattern of "rise-fall-rise." Residential gas and ether-based C4 prices moved in tandem, with their price centers notably higher than the previous month. Geopolitical developments were the key driver for the entire month. As of March 27, the monthly average price of domestic residential gas was 5,718 yuan per ton, up 1,306 yuan per ton from the previous month, an increase of 29.60%. The monthly average price of ether-based C4 was 5,444 yuan per ton, rising by 1,369 yuan per ton, or 33.59%. In early March, escalating conflicts in the Middle East pushed international crude oil prices higher, raising LPG import costs. Combined with reduced operating rates at domestic refineries and fewer vessel arrivals, resource supply tightened, leading to a simultaneous sharp increase in residential and ether-based C4 prices. However, after LPG prices peaked temporarily, downstream companies became less willing to purchase at high prices. Along with easing Middle East tensions and a retreat in crude oil, prices fluctuated downward, with some regions giving up earlier gains. In late March, Middle East tensions escalated again, raising concerns about supply disruptions and higher costs, which pushed prices upward once more. Overall, market trends this month were closely tied to geopolitical developments, with international oil price fluctuations directly dictating price movements. Residential gas received stronger support from the supply side, while ether-based C4 was more influenced by the oil products market and deep-processing demand, resulting in similar but differently elastic price trends.
The domestic ether-based C4 market fluctuated upward this month, with average price increases exceeding 30% across four major regions. Geopolitical factors and cost-side dynamics dominated the market, while weak downstream demand limited the extent of gains. As of March 27, the average price in Shandong was 5,792 yuan per ton, up 1,406 yuan from the previous month; North China averaged 5,458 yuan per ton, up 1,385 yuan; East China averaged 5,369 yuan per ton, up 1,336 yuan; and Northeast China averaged 5,031 yuan per ton, up 1,352 yuan. Shandong, as a hub for domestic olefin C4 deep processing, showed active price adjustments and consistently led gains among the four regions. Concerns over supply disruptions continued to intensify, driving ether-based C4 prices higher. As geopolitical risks eased and downstream oil product producers showed low acceptance of high-priced raw materials, prices retreated partially. Later, expectations of tight import supply continued to support market sentiment, leading to another price increase. Toward the end of the month, prices fluctuated narrowly amid a tug-of-war between high costs and weak demand, with the Shandong market moving between 6,000 and 6,500 yuan per ton. The monthly fluctuation range narrowed to within 500 yuan per ton.
In the domestic propane market, prices rose significantly this month. As of March 27, the average market price was 5,871 yuan per ton, up 1,101 yuan from the previous month, an increase of 23.08%. The month saw prices surge initially before experiencing a slight pullback. Escalating Middle East tensions were the core driver, boosting international crude oil and overseas prices, coupled with expectations of reduced supply. Both upstream and downstream participants maintained a positive outlook, prompting producers to raise offers. After prices climbed, downstream resistance emerged. However, the domestic supply-demand balance showed no significant improvement: domestic resource output fell slightly by 1.34% month-on-month, while imports increased modestly, keeping total supply stable. Downstream demand remained weak, with limited刚性 demand for combustion and low operating rates at PDH units, providing insufficient support for the market. By month-end, mixed signals weakened bullish sentiment, leading to a moderate price decline. Nonetheless, the monthly average price remained significantly higher than in February.
Downstream LPG demand showed some improvement, but profit conditions varied more distinctly. In LPG deep processing, losses at alkylation units, which use olefin resources, improved notably in March. The key driver was geopolitical risks pushing up product prices, while raw material costs rose at a slower pace. The narrowing spread helped reduce losses. As of March 27, Shandong ether-based C4主流 prices ranged from 5,950 to 6,220 yuan per ton, while alkylate oil prices were between 9,150 and 9,540 yuan per ton. Daily unit profits stood at -214 yuan per ton. Based on cost and product price calculations, Shandong alkylation units averaged a monthly profit of -284 yuan per ton in March, a reduction in losses of 128 yuan from the previous reporting period. Middle East tensions drove a sharp increase in alkylate oil prices, while the rise in feedstock ether-based C4 lagged, leading to a continuous spread recovery. This was the main reason for the significant reduction in unit losses, easing profit pressure in the industry compared to earlier periods.
In alkane deep processing, domestic PDH unit profits continued to deteriorate this month. As of March 27, the average monthly gross profit was -1,813 yuan per ton, with losses deepening by 1,099 yuan from the previous month. The core reason was a mismatch between import cost increases and product price gains: driven by Middle East tensions, international冷冻货 prices surged, raising import costs. Although propylene prices also rose,受阻 terminal demand transmission pressured downstream product sales, limiting propylene demand and price increases. This resulted in a significant contraction in PDH profits. In March, Shandong isobutane dehydrogenation unit profitability improved markedly, with an average monthly profit of 304 yuan per ton, up 445 yuan from the previous period, turning losses into gains. Compared to the same period last year, profits rose by 492 yuan. The average price of Shandong isobutane this month was 6,126 yuan per ton, up 1,613 yuan or 36% month-on-month, and 13% year-on-year. The market showed a pattern of surging then retreating with wide fluctuations, driven primarily by crude oil supply concerns stemming from Middle East tensions, along with downstream sentiment swings. During the same period, Shandong MTBE price trends closely mirrored those of isobutane, with slightly larger gains. The continuous spread recovery between feedstock and products enabled isobutane dehydrogenation units coupled with MTBE production to turn profitable, showing sound overall profit margins.
Looking ahead, although imports dropped sharply after March 20 due to Middle East conflicts, increased shipments from the U.S., a slight pullback in international prices, and low port inventories led to higher imports earlier in the month. Overall, domestic LPG imports in March are expected to reach 2.7 million tons. However, production may trend downward due to feedstock shortages caused by Middle East conflicts. At the same time, deep-processing demand has shrunk noticeably. Combined, these factors slightly widened the supply-demand gap in March. In international crude oil markets, intense geopolitical maneuvering in the Middle East, difficult U.S.-Iran negotiations, and sustained maximum pressure strategies keep supply-side risks alive. Significant production cuts by Saudi Arabia, Iraq, and others are unlikely to reverse quickly, and transit efficiency through the Strait of Hormuz remains low. With the approaching U.S. summer demand peak and ongoing refinery inventory drawdowns, a crude oil supply gap persists, supporting high and volatile prices. Consequently, the domestic liquefied gas market may experience an initial rise followed by a decline. For residential gas, support comes from high international oil prices, elevated import costs, and reduced import resources. Expectations of tight supply may push prices higher initially. If Middle East tensions ease in mid-to-late April, oil and overseas prices could retreat, potentially leading to a price decline.
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