US propane prices aligned with delivered prices into Asia in 2017
The Argus Far East Index (FEI) , the benchmark for delivered propane prices into China and Japan, averaged only a $1.18?/t premium versus delivered US prices during the fourth quarter of this year, down from a $37/t premium seen during the first quarter.
US delivered prices into the region, measured using Mont Belvieu prices plus terminal fees and spot freight rates, swung to a premium versus the FEI at various periods during the second half of the year. US delivered prices to Asia averaged an $11/t premium to the FEI during the latter half of June, resulting in at least five cargo cancellations for July loadings and another 10 in August.
The narrow netbacks to Asia, the largest consumer of LPG, left US spot fob rates near cancellation economics for much of the latter part of the year.
Strong demand from PDH units in Korea and China, coupled with underlying volumes required for wintertime heating in Japan, kept US term cargoes moving into the region even under a closed arbitrage on paper.