LPG Trade in Europe: How Sanctions and U.S. Supply Are Shaping 2024

OPIS joins the European Liquid Gas Congress June 18-20, 2024, in Lyon, France, where liquid gas industry leaders will converge to network, learn, and explore the vital role LPG plays in ensuring a resilient energy supply for the EU and help decarbonize our future.

Register for your spot today — see you there!


In Europe, there are going to be some structural changes to liquefied petroleum gas (LPG) trade flows in 2024, both in the north and south of the continent, with reliance on U.S. exports ramping up.

Russian Ban Coming

One of the drivers for the change has come from the announcement on Dec. 19, 2023, of the European Union’s 12th package of sanctions towards Russia. The package included measures to ban LPG imports with a 12-month transition period. There is a stay of execution until Dec. 20 this year for contracts concluded before Dec. 19 in 2023.

The EU estimates the import ban will impact annual imports worth over €1 billion ($1.09 billion). According to European Commission data, Russian supply made up around 6% of total LPG imports in the EU in 2023.

Russian seaborne LPG exports to countries within the EU in the first quarter of 2024 sank 52% on the year to 54,000 metric tons, according to data from shipping analytics firm Vortexa.

So where is Europe going to source the 6% of total imports it needs to offset Russian supply?

U.S. LPG Flows Ramping Up

The reliance on U.S. supply is likely to ramp up in 2024 and there are already signs of this being the case both in Northwest Europe and the Mediterranean.

In the first quarter of 2024, U.S. LPG shipments to the Mediterranean exceeded Northwest Europe flows. Butane and propane exports to the Mediterranean from the U.S. reached 1.56 million mt in Q1 2024, while flows into Northwest Europe totaled 1.49 million mt over the same period, Vortexa data showed.

One driver for this may be due to a change in pricing formula for Morocco. The contract basis for imports into Morocco partly relied upon a pricing element of a monthly set term price, on a Free on Board (FOB) basis, for exports of propane and butane by Algerian state energy company Sonatrach.

However, following a rift in diplomatic relations between the two North African countries, Algeria halted all LPG exports to Morocco in mid-2022. Since then, the pricing basis has gradually altered to more reflect the change in origin of Moroccan imports. For 2024, the contract basis was understood to include a significant U.S. Mont Belvieu pricing element.

U.S. Exports Maxed out in the Short Term

Looking ahead, outflows from the U.S. are expected to stay capped, with dock capacity maxed at around 1.7 million-1.8 million b/d until planned waterfront expansions come online in 2025-2026.

Nevertheless, U.S. LPG production is expected to increase by around 4% from 2023 to 2024, attributable to increased fractionation and terminal capacity, according to Oslo-listed shipowner BW LPG.

The U.S. is currently awash with propane, as output for the week ended April 19, 2024, hit 2.823 million b/d, a record high, according to data from the Energy Information Administration dating back to 2004. Stocks sat at 64.2 million bbl in the week ending May 17.

Meanwhile, exports—a typical safety valve to prevent U.S. propane supplies from ballooning out of control—jumped to a new record high at 2.33 million b/d in the week ending April 19.

All Eyes on the Canal

Very Large Gas Carrier owners are anticipating an increase in LPG trade in 2024, while transit restrictions at the Panama Canal are expected to amplify operational inefficiencies in the VLGC fleet, causing vessels to take longer voyages, tightening vessel availability.

Last winter, low water levels at Gatun Lake resulted in draft restrictions, which led to increasing congestion and delays. Transit restrictions were put in place to help the canal conserve water at the Gatun Lake, which feeds into the Canal’s lock system.

A new record high fee was paid for a transit on Nov. 8, 2023, as Japan’s Eneos Group booked the VLGC Sunny Bright at $3.975 million at auction, in addition to the regular transit fee of around $400,000.

While many global export markets eye the Asia-Pacific region as a major future consumer of U.S. LPG, conditions may flip more in favor of a European destination market if the Panama Canal faces similar delays as it did in 2023.

Petchem Flows

Petrochemical margins in Europe have been challenging due to higher power costs and dwindling downstream demand. So far, this has hit naphtha-fed crackers the most, with this sector seeing extended shutdowns at numerous units.

In Europe, the propane/naphtha spread ranged between minus $170s/mt and $180s/mt for most of April, leaving processors preferring propane feedstock to maximize their cost advantage. By comparison, a spread of around minus $50/mt would favor the use of naphtha as a steam cracker feedstock, according to OPIS data. And at time of writing, the propane/naphtha spread has averaged minus $162/mt in May, OPIS data show.

Freight rates and arbitrage values, both to Europe and to Asia, will be key figures to watch in 2024. In addition, Asian petrochemical demand will be a major determining factor in global LPG export flows in the year ahead. Propane dehydrogenation margins in the East have been negative since 2021, but additional PDH capacity is poised to come online in the year ahead in China.

Tags: NGL & LPG