Since 2026, domestic Dorian LPG prices have experienced significant volatility, surging on geopolitical drivers before retreating under pressure from weak demand. The import arbitrage window has followed a "roller coaster" trajectory, moving from closure to opening, then to wide fluctuations, and finally to complete closure. As of the end of April, the LPG import arbitrage spread was deeply inverted, with an average value of -794 yuan per ton. Under the dual pressures of high import costs and weak demand, a pattern of weak, range-bound market fluctuations has largely been established.
After the Spring Festival until early March, the domestic Dorian LPG market remained sluggish, with soft residential demand coupled with cautious procurement in the chemical sector, keeping the import arbitrage window closed for an extended period. The turning point came from the sharp escalation of tensions in the Middle East, which became the core factor driving a reversal in LPG prices.
Data shows that in March, China's LPG import arbitrage window exhibited a characteristic of "significant widening." An analyst from Longzhong Information noted that the import arbitrage space for LPG in March was considerable, with per-ton profits exceeding 2000 yuan by late March. The opening of this arbitrage window primarily stemmed from a timing mismatch between cost factors and market dynamics. Saudi Arabia's March CP official price was announced before the outbreak of conflict in the Middle East on February 28th, locking in import costs before the conflict premium. After the conflict erupted, navigation through the Strait of Hormuz was obstructed, and Middle Eastern refinery operating rates declined. Market expectations for global LPG supply tightened abruptly, driving a sharp rise in spot prices for imported LPG and consequently opening the arbitrage window.
It was observed that in March, the price of the main LPG futures contract surged from 4,500 yuan per ton to 7,244 yuan per ton at one point, representing a monthly increase of over 35%.
Entering April, the LPG market dynamics changed abruptly. The import arbitrage window rapidly narrowed until it closed completely, with the negative inversion continuing to widen. "Extreme cost escalation was the primary driver," stated an LPG analyst from SCI. Saudi Aramco's April CP prices were raised significantly beyond expectations, with propane adjusted to $750 per ton (an increase of $205 per ton month-on-month) and butane adjusted to $800 per ton (an increase of $260 per ton month-on-month). Calculations show that the average import landed cost for domestic LPG in April was approximately 8,100 yuan per ton, a surge of nearly 2,000 yuan per ton compared to March, reaching a historical high.
Weak demand added further pressure. A senior researcher at Galaxy Futures indicated that as temperatures rise, residential combustion demand enters its traditional off-season, with significant diversion to alternative energy sources like natural gas, slowing the pace of terminal consumption. The chemical sector has fallen into a negative feedback loop, with operating rates for PDH, alkylation, and MTBE units continuing to decline, downstream procurement enthusiasm remaining low, and profit margins being continuously compressed. Concurrently, the fluctuating situation in the Middle East lacked sustained geopolitical support. The retreat in international oil prices further weakened cost support for the chemical industry. Domestic Dorian LPG prices have continued to weaken since mid-April, forming an inverted pattern of "high costs, weak prices," leading to the complete closure of the arbitrage window.
"The closure of the arbitrage window has impacted the domestic LPG industry chain," the researcher noted. High import costs continue to compress profit margins for trading companies, while the deep inversion severely affects subsequent shipment arrivals. Since April, procurement volumes at import terminals have noticeably decreased. Some small and medium-sized trading firms have been forced to suspend operations due to losses, further reducing market liquidity.
The downstream industry chain is also under pressure. It is understood that under high raw material costs, PDH unit operating rates are running at low levels, reducing propylene output and pushing companies into losses. Operating rates for alkylation and MTBE units have also declined due to weak demand. The contraction in chemical demand, in turn, further drags down LPG procurement demand, creating negative feedback. Meanwhile, domestic resources, due to their relatively lower prices, are substituting for and impacting imported gas, further squeezing the market share of imported LPG.
Regarding the future trend of LPG prices, the Longzhong analyst believes the market may continue to face the dilemma of "high costs, low demand."
From the perspective of the Galaxy Futures researcher, under the dual pressures of high costs and weak demand, the likelihood of the LPG import arbitrage window turning comprehensively positive is extremely low.
"On the cost side, Saudi Aramco's May CP prices remain high, making it difficult for importers to find relief from pressure. On the supply side, while U.S. supply volumes increased in May, domestic inventories are at relatively low levels, temporarily not exacerbating port inventory pressure. On the demand side, May remains the off-season for combustion demand, and the low operating rate trend for PDH units is difficult to reverse. Although chemical restocking demand may gradually emerge in June, the overall supportive effect is limited," stated the SCI analyst.
The Galaxy Futures researcher indicated that the current logic driving LPG price movements has shifted from fundamentals to a contest between geopolitical event-driven factors and the weak reality of fundamentals. Currently, the obstruction of the Strait of Hormuz has persisted for two months, and U.S.-Iran negotiations have seen no substantive breakthrough. Although geopolitical premiums continue to be priced into the market, they face the risk of being unwound at any time. In her view, three core variables require close attention going forward: the navigation situation in the Strait of Hormuz and the direction of U.S.-Iran negotiations, U.S. LPG export volumes and arrival schedules, and domestic PDH operating rates along with the pace of chemical sector restocking.
From the Longzhong analyst's perspective, in the medium to long term, geopolitical premiums are expected to continue receding, but supply recovery in the Middle East will take time. High costs will continue to squeeze the profit margins of related companies. For industry chain participants, current market volatility risks have intensified. Companies need to strengthen their analysis of both geopolitical factors and fundamentals, reduce exposure, balance supply security with cost control in procurement, and utilize futures tools to stabilize operations.
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