Asia’s largest liquefied petroleum gas importers, including India and China, are rapidly shifting procurement strategies as disruptions in Middle Eastern supplies tighten availability and push prices to unprecedented levels, according to analysts and traders.
The Middle East, traditionally the region’s primary supplier of LPG used for cooking and as feedstock for petrochemical plants, has seen exports decline sharply following the outbreak of the US-Israeli conflict with Iran in late February.
The resulting supply shock has forced buyers across Asia to seek alternative cargoes, particularly from the Americas.
Data from analytics firm Kpler showed that Middle Eastern LPG exports dropped 73% to 419,000 barrels per day in March compared to the previous month.
The sudden decline has triggered a sharp increase in spot premiums for propane and butane.
According to pricing agency Argus, spot premiums for April-loading cargoes from the Gulf surged to a record $250 per metric ton above the March Saudi contract price swaps on March 30.
Saudi Aramco also responded to the tightening market by significantly raising its April official selling prices.
The company increased the propane price by $205 per ton to $750, while butane rose by $260 per ton to $800.
Importers diversify sourcing strategies
As supply from the Gulf tightens, key importers are actively diversifying their sourcing mix.
Vasudev Balagopal, global head of petrochemical trading at Marex, said, “Key importers such as India are actively diversifying their sourcing strategies, increasing procurement from the United States, Norway, Canada, and other regions alongside remaining Gulf supplies.”
To bridge the supply gap, US LPG exports are expected to climb to a record 2.7 million bpd in April, with approximately 1.8 million bpd destined for Asia, marking a 14% increase from March, according to preliminary Kpler data.
This surge in demand has also driven US Gulf spot terminal fees for propane and butane to record highs of $273.525 and $240.09 per ton, respectively, as of March 19, based on Argus data.
Capacity constraints and logistical challenges
Despite increased flows from the US, market participants caution that American supply cannot fully replace Middle Eastern volumes.
Greg Bower, a broker at New Stone, noted that US export terminals were already operating near capacity before the conflict.
Additionally, logistical challenges persist.
Shipping LPG cargoes from the US Gulf Coast to Asia takes over 30 days, significantly longer than the roughly two-week transit from the Middle East.
This extended delivery time is adding pressure to already strained supply chains.
Uncertainty surrounding the reopening of the strategic Strait of Hormuz, amid a fragile ceasefire involving Iran, is further complicating supply dynamics.
Demand destruction and production cuts
The supply crunch has begun to weigh on demand across Asia.
Analysts reported that constrained LPG availability has led to production cuts among petrochemical producers and reduced consumption.
Consultancy Rystad Energy estimated that LPG demand from regional steam crackers declined by about 135,000 bpd in March compared to February levels.
The firm expects further reductions of 35,000 bpd in April and 11,000 bpd in May.
In China, propane dehydrogenation plants, which were already operating at 60% to 65% capacity due to weak margins, are projected to cut utilisation by an additional five percentage points in April.
India has also seen a notable impact on household consumption, with cooking gas demand dropping by around 205,000 bpd in March.
Rystad analyst Manish Sejwal said, “The supply situation in India is gradually improving but shortages persist even as long-haul cargoes arrive in India from as far as Argentina and the US.”
Outlook remains uncertain
While some relief is expected as alternative supplies arrive, analysts warn that the market will remain tight in the near term.
Rystad expects Indian LPG demand to recover from April, with losses narrowing by around 70,000 bpd.
However, continued geopolitical uncertainty and logistical bottlenecks are likely to keep pressure on both supply and prices, prolonging the strain on Asia’s energy markets.
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