LPG prices have fallen obscenely – Newspaper Kommersant No. 31 (7476) of 20.02.2023

The market for liquefied hydrocarbon gases in Russia is experiencing sharp, up to ten times, price jumps against the backdrop of a significant surplus of the product. The fall in quotations in February led to the zero export duty in March, which may stimulate demand for Russian LPG abroad. Experts believe that such volatility in the sector will continue in the future until a balance is found between supply and demand.

Wholesale prices for liquefied hydrocarbon gases in Russia by mid-February year on year decreased by 9.6 times, to 2.4 thousand rubles. per 1 ton, which is a historical minimum in the history of trading on the SPIMEX. At the same time, there has been a sharp increase in the market in the last week: by February 17, the cost of propane-butane returned to the level of 3.6 thousand rubles. per 1 ton, which is 6.4 times lower than the same period in 2022. Compared to the previous day, the growth amounted to almost 15%, by the beginning of the month, quotes rose by about 26%.

Last year, there was great volatility on the stock exchange in the LPG trading sector, when the cost of petrochemical raw materials could more than double in one month. So, for example, from mid-February 2022 to mid-March, the price decreased from 23.3 thousand rubles. up to 10 thousand rubles In general, LPG quotes during 2022 exceeded the level of 15 thousand rubles only for several weeks. for 1 ton. The peak was in September, but already from October until the end of the year they were at a level below 10 thousand rubles, and since the beginning of 2023 they did not exceed 5 thousand rubles.

Such sharp fluctuations are associated by market participants with a surplus of LPG amid limited exports, and a decrease in prices in winter is a seasonal decline in demand within Russia. Europe has traditionally been the largest export market for Russian LPG, but shipments have dwindled since the outbreak of hostilities in Ukraine. According to Kommersant’s interlocutors, such volatility has become traditional on the stock exchange and will continue until a radical change in the situation with the consumption of this product. Prices are also affected by low export demand. Interlocutors of Kommersant explain that foreign consumers in the Baltic States, Central Asia and China in January took a wait-and-see attitude against the background of the upcoming reduction in the export duty on propane-butane mixture from February 1 to $21 per 1 ton from $46 per 1 ton in January.

In this regard, and also taking into account the end of the New Year holidays in China, by the end of February, traders expect demand to recover with an improvement in consumption dynamics in March, when the export duty will become zero for the first time since July 2021 against the backdrop of record low LPG export quotations (the basis for calculating duties serve as quotations on the Belarusian-Polish border).

At the same time, as traders and experts note, against the background of a significant surplus of liquefied gases in most regions of Russia, their shortage has been observed in the Far East since mid-January and in February, where severe frosts persist. The main reason is the congestion of railways in this direction. The consumers of the Trans-Baikal Territory, the Amur and Irkutsk regions, as well as Buryatia complained about the shortage. In these regions, the situation in February was complicated by the lack of supply of car lots of propane-butane from the Angarsk Petrochemical Complex of Rosneft. This led to a significant increase in prices for car lots by the end of February (up to 30–35 thousand rubles per 1 ton). A similar situation, according to market participants, may persist until the end of the heating season, as there is no need to expect an improvement in the situation with rail supplies in the near future.

Nina Adamova from the CEP of Gazprombank names petrochemical production, re-equipment of vehicles for the use of propane-butane, as well as consumption for household needs in poorly gasified regions (as, for example, in the countries of Central and South Asia) as the main promising areas for the consumption of liquefied hydrocarbon gases. But, the expert says, on the horizon of one or two years it is impossible to increase consumption in the domestic market by 2 million tons, therefore, most likely, LPG producers will still look for additional sales channels in foreign markets.

Olga Mordyushenko