SunSirs: Prices for Domestic-use and Imported LPG Drop Sharply in China; Market Stuck in Low-Level Fluctuation

On July 6, the benchmark price for LPG (Liquefied Petroleum Gas) tracked by SunSirs stood at 5,200 RMB/ton, a slight decline of 0.34% from the 5,217.50 RMB/ton recorded at the beginning of the month. Between June 29 and July 5, prices initially dipped before stabilizing; after July 2, the price remained flat at 5,200 RMB/ton, with fluctuations becoming subdued.

Divergent Trends Across Market Segments

1. Domestic-use LPG: Significant weakening driven by a convergence of bearish factors

The average index for domestic-use LPG during this period was 5,450 points, a sharp month-on-month drop of 13.31%. Although concentrated refinery maintenance kept overall market supply low, multiple bearish factors suppressed the market: terminal demand for residential fuel continued to weaken amidst high temperatures; an increase in incoming import shipments drove down terminal prices for imported gas, rapidly narrowing the price gap between domestic and imported gas and putting pressure on domestic prices; and pervasive market pessimism and sluggish trading activity drove prices steadily downward.

2. Imported LPG: Prices fell more sharply than domestic gas, primarily due to a collapse in costs

The average index for imported LPG was 5,856 points, a steep month-on-month decline of 15.83%—far exceeding the drop seen in domestic gas. Easing geopolitical tensions in the Middle East and the restoration of shipping routes led to a significant drop in import costs. With expectations of increased future shipment arrivals, import traders lowered prices early to offload stock and recover capital; however, insufficient domestic consumption hindered sales, further exacerbating downward pressure on prices.

3. Feedstock Gas: Initial decline followed by a rebound; market driven by changes in essential demand

The average index for feedstock gas was 4,949 points, a month-on-month decline of 8.36%, with the price trend showing an initial drop followed by a slight rebound. Earlier, international crude oil prices declined, and operating rates at downstream deep-processing units remained low; with insufficient essential procurement, prices continued to fall. Towards the end of the month, however, profit margins for alkylation units improved, leading to higher operating rates and increased essential buying. Coupled with tight market supply and a marginal improvement in fundamentals, feedstock gas prices halted their decline and staged a slight rebound.

Market Outlook for Early-to-Mid July

Technical Perspective: The market is currently undergoing a period of sideways consolidation following a decline; there are no signals indicating the start of an upward trend. While downward momentum has weakened, there is insufficient upward drive.

Fundamental Perspective: Bullish and bearish factors are intertwined, with the overall market leaning towards weakness.

Supply Side: July Contract Prices (CP) were significantly lowered, reducing import costs and paving the way for a gradual increase in import volumes. Regional supply patterns are divergent: supplies from Shandong refineries have contracted, while arrivals at East China terminals have increased; overall national supply remains at a relatively low level.

Demand Side: Trends are clearly divergent. Demand for residential fuel remains sluggish, failing to provide significant market support. Conversely, demand for chemical deep-processing is expected to recover gradually, though this will only offer localized support to the market.

Overall Assessment: Liquefied gas prices are expected to fluctuate at low levels during the first half of July, with the average price point sitting below that of June. Although prices have stabilized in the short term, there remains some room for a slight downward drift; a narrow-range fluctuation to establish a market bottom is the most likely scenario. Key attention should be paid to whether the 10-day moving average crosses above the 20-day moving average; only when this spread shifts from negative to positive can the market break free from its weak trend and initiate a sustained rebound.

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