Comment by Megan Kennedy
Across multiple LPG market calls we've attended over the last month, industry players talked about the recent state of the market as well as what's to come in the coming years for LPG trade. Topics of conversation ranged from lower-than-expected VLGC rates in 2024 Q4, to expected supply growth out of the US and Middle East going forward, to the startup of ethane and longer-haul ammonia trades.
While all of these topics are worth deliberating, one important issue was markedly absent from presentation slide decks: the implications for US LPG trade to China now that the new Trump administration is expected to impose tariffs on goods from China. At Marsoft, we see this issue as having very significant implications for LPG trade and in particular, VLGC tonne-mile trade starting as soon as later this year.
We covered this issue in our last LPG/VLGC Market Report for 2024 Q4 and expect it to be a major sticking point going forward. We believe it is highly likely China will retaliate against Trump-imposed tariffs by slashing LPG imports from the US, in a repeat of 2018/19 developments during the first Trump administration.
In our 24Q4 Base Case, this translated to a displacement of roughly 75% of US LPG exports to China after 2025, or the equivalent of around 8 million tonnes. Following the original 2019 developments, China resumed importing LPG from the US about a year later – we considered a similar outlook in our High Case scenario. However, our Base Case assumed that China will curb its LPG imports from the US throughout our forecast horizon (through 2028).
Given that the US is the largest exporter of LPG (accounting for up to half of global LPG exports in 2024), and that China is the largest importer of the fuel (accounting for roughly a quarter of total LPG imports), the impact of a Chinese retaliation against US-imposed trade tariffs is worth talking more about. We expect this to be one of our primary topics for discussion in our upcoming 2025 Q1 LPG/VLGC Market Report.
