This April, the escalation of the US-China trade war forced Chinese plastic factories to seek raw material suppliers outside the United States. Although the two countries have currently paused their confrontation, Chinese buyers are still reluctant to switch back to American suppliers, highlighting the difficulty of restoring commercial ties between the world's two largest economies.
Propane is a type of liquefied petroleum gas (LPG) used for heating and in the production of plastic products. China is the second-largest customer of US propane, after Japan. After both countries imposed trade tariffs on each other in April, Chinese buyers found US propane unaffordable and were forced to seek sources elsewhere, causing propane prices to plummet in the US market.
According to Bloomberg, despite a 90-day adjustment of tariffs between the US and China, multiple traders have indicated that Chinese buyers remain cautious about restarting purchases due to concerns over the resurgence of the trade war.
Traders revealed that as of last week, Chinese Propane Dehydrogenation (PDH) facilities, which convert propane into basic raw materials for plastic, were still primarily sourcing from Canada and the Arabian Gulf region.
They noted that as more buyers gradually adapt to alternative supply channels, the premium between the transaction price and the benchmark price is narrowing, possibly indicating sellers' desire to secure long-term orders from China.
The report points out that earlier this month, due to the strong demand and fierce competition for alternative, non-US sources of propane, product premiums once soared to as much as $70 per ton (295.18 Ringgit), but these premiums have now decreased.
Hartke, the head of Americas market analysis at shipping analytics company Vortexa, told Bloomberg that at the current 10% tariff level, the profit of using US propane in China is "not substantial," approximately $20 per ton (84.34 Ringgit). She said: "Unless US propane prices decrease, or the prices of alternative sources in East Asia increase, US production will not flow to China."