Wholesale prices for LPG in November recovered to 2021 levels

Wholesale prices for liquefied petroleum gases in Russia in November fully recovered to the 2021 level, reaching maximum values ​​over the past two years at 35 thousand rubles. per ton. Against the backdrop of sanctions and the closure of exports, prices at the beginning of 2023 dropped to their lowest levels in history, which made the production of LPG unprofitable. In the coming months, experts expect a seasonal decline in the cost of LPG.

Liquefied hydrocarbon gases (LPG) in Russia continue to rise in price. On the over-the-counter market, on November 24, prices for this product based on the Urals and Siberia reached their maximum in two years – 33.7 thousand rubles. per ton. In the European part of Russia, its cost remains at its peak of 35.7 thousand rubles. per ton from November 21. This is 5.8 times higher than at the beginning of the year, and approximately corresponds to the level in November 2021, after which wholesale prices for LPG in Russia sharply decreased amid problems with exports due to sanctions, reaching a minimum of 5 thousand rubles. in February 2023. Wholesale prices for LPG reached their highest level in history in August 2021, exceeding 48 thousand rubles. per ton.

On the exchange market, prices are now slightly lower than on the over-the-counter market: they have reached their maximum of 37.6 thousand rubles. per ton on November 10, which market participants associated with ongoing repairs at Russian refineries and high demand amid a reduction in supply. As noted in an Argus Media report dated November 22, citing an industry participant, the excitement in the market is decreasing, while demand remains, but varies greatly by region.

In the future, according to market participants, prices will gradually decline.

Rail shipments of LPG to the Russian market from November 1 to November 21 increased to 430 thousand tons (an increase of 14% compared to the same period in October). In addition, the agency notes, a fairly high price level in Russia contributes to gas supplies from Belarus. At the same time, in many regions, problems with shipments by rail remain, they are especially significant in the south, where, due to unstable supplies, some market participants provide only their retail networks and have stopped small wholesale sales.

There are also difficulties with rail shipment of LPG to China. Thus, the accumulation of tanks at the Zabaikalsk station still remains, which, along with high prices in Russia and the strengthening of the ruble exchange rate, limits sales of the product to China, Argus Media points out. At the same time, traders expect the price of the product to rise in China in January on the eve of the Chinese New Year, which will begin on February 10 in 2024. At the same time, in Russia at this time of year, market participants expect reverse dynamics due to the low consumption season. In December, the export duty rate on LPG will more than double, from $2.2 to $4.7 per ton, but this is unlikely to affect export volumes.

As noted by the head of Rupec, Dmitry Semyagin, throughout 2023 there was an increase in exchange prices for liquefied petroleum gases compared to 2022.

He recalls that last year was a period of historically minimum prices for LPG against the backdrop of a revision of foreign sales markets, decreased demand and a serious surplus in the domestic market. “At some point the price level did not justify the costs of production and delivery in modern conditions. It was logical to assume that this situation would not last long,” says the expert. “Therefore, in 2023, a smooth recovery in prices began. Now LPG at St. Petersburg International Trading Exchange is trading slightly below 2021 levels.”

He notes that several times this year there have been sharp price hikes due to speculative actions in the market, with individual players trying to use the general upward trend to make money on rumors of possible shortages within the country due to increased exports. In fact, supply on the domestic market, following the growth in demand, also increased. At SPbMTSB, the sales volume of LPG for fuel in January-September amounted to 1.7 million tons, which is 32% more than in the same period in 2022. Dmitry Semyagin notes that this growth occurred not due to the redistribution of flows and a decrease in exports, but due to an increase in production.

Olga Mordyushenko