Latent LPG demand in Asia, led by China’s growing market, could absorb the return of Iranian cargoes to global markets if the Biden administration were to lift the sanctions imposed by the Trump administration in 2018, trade sources have told S&P Global Platts.

“I believe there would be about 6 million mt of shortage this year,” one source familiar with Iranian supply said. “Its [return] will be absorbed easily — the demand in China is rapidly increasing.”

China’s LPG demand in 2021 is expected to rise by around 3.5 million mt from 2020, driven by the startup of PDH and steam cracking operations, with net deficit rising by roughly 2.5 million mt, according to S&P Global Platts Analytics.

Additional demand is seen emerging from Wanhua Chemical’s steam cracker that uses almost 100% LPG as feedstock, which was started up on Nov. 9, 2020. It was followed by Zhejiang Petrochemical’s 450,000 mt/year and Zhejiang Huahong’s 600,000 mt/year PDH plants, while Fujian Meide Petrochemical, a unit of China Flexible Packing Group, is operating its newly built PDH plant in Jiangyin at 90%-95%. The plant can use 795,000 mt/year of propane as feedstock at 100% capacity.

China’s 19 PDH plants and crackers process about 12.74 million mt/year of LPG.

But another source familiar with Iranian shipments said: “I don’t think that if any changes are to be done, it would happen so quickly and overnight. I think it needs time, at least six months or so; hopefully we can be back to normal conditions as soon as possible.”

An Asian trade source said normal Iranian exports might not be restored as early as this year and would take up to 8-10 months to ramp up production fully. This is because their production facilities lacked investment, he added.

Iran’s oil minister Bijan Zanganeh was reported to have said that while Iran had achieved record oil product exports under the toughest of sanctions, there had been issues with a lack of investment.

US sanctions on Iran’s oil exports have led to revenue losses exceeding $50 billion, severely impeded its push to expand refined product exports, and ended foreign investment in its energy sector, the US State Department’s special representative for Iran, Brian Hook, said in a report dated Dec. 12, 2019.

What does the new normal hold for Asian refiners? Gain access to industry leaders who will share their views on how the refining landscape is shifting and the sector is adapting.

US sanctions imposed on Iran oil and gas exports in May 2018 prompted a near halt of Iranian LPG shipments by the end of that year. But some exports to Asia, mostly to China, resumed in 2019, peaking at near 530,000 mt in June of that year, shipping sources said earlier. This was despite higher insurance premiums for vessels plying the wider Middle East following the sanctions, sources said.
China’s VLGC armada

Those shipments were facilitated by Chinese shipowners’ armada of VLGCs to import LPG for its expanding petrochemical sector, enabling Chinese importers to circumvent restrictions that international shipping and trading firms faced during the 2014 and 2018 sanctions on Iran for its nuclear program.

Iranian exports continued through 2020 at a monthly average of 337,00 mt, down from 457,000 mt in 2017 before US sanctions were imposed, according to Iranian customs data. At its peak before the sanctions, Iran exported about 15 LPG cargoes/month, or more than 600,00 mt.

Iran’s total LPG exports in 2020 were 4.3 million mt, down 690,000 mt year on year and the lowest since 2017, industry sources said, citing customs data.

However, Iran’s fourth quarter exports averaged 380,000 mt/month, up 30,000 mt/month from Q3 and up 50,000 mt/month from Q1.

Despite the uptick, any resumption of normal exports will have to wait, as US President Joe Biden has said he will not lift sanctions to get Iran back to the negotiating table, suggesting the move would occur only if Tehran stops enriching uranium. Asked by CBS in a Feb. 5 interview if he would make the move to start negotiations, Biden said: “No.”

The president has said he would seek to revive the deal, but insisted that Iran must first reverse its nuclear plans.

Zanganeh said Jan. 22 that Iran was confident of regaining its pre-sanctions oil market share, as Tehran pins its hopes on the new US administration removing sanctions. He told parliament that the country’s crude exports were around 900,000 b/d, with plans to increase to 2.3 million b/d from March, still below a high of 2.6 million b/d reached in May 2018.

The source familiar with Iranian supply said: “There is certainly an easy 1 million b/d of crude to return to the market in the short term, but more than that may be a bit tough to say within 2021”.
Higher US exports

Normalization of Iranian LPG exports must, however, contend with rising US exports to Asia, including China, which in October 2020 imported 740,604 mt of US LPG, up 6.4% on month — a record monthly high and accounting for 41% of its total LPG imports, Chinese customs data showed.

Although China’s imports from the US fell 40.8% on month to 438,686 mt in November, the US remained the country’s top supplier, customs data showed.

The US was also the biggest LPG supplier to China over January-November at 4.29 million mt, compared with 2,443 mt in the same period a year earlier, customs data showed. China resumed LPG imports from the US in March 2020 after an 18-month hiatus when Beijing granted the US LPG import tariff exemptions in line with Phase 1 of the US-China trade deal.

Fonte: https://www.hellenicshippingnews.com/asia-led-by-china-can-absorb-return-of-iranian-lpg-to-world-markets/