LPG Shipping: China mulls trade war on propane

Every market would suffer if the US and China descend into a trade war, but the already weakened LPG sector will suffer more than most, prolonging the wait for a recovery.

The battle over tariffs between the US and China is looking more like turning into a war. Both administrations have announced a new list of commodities to be targeted with higher import duties, and propane has been included on China’s hit list.

China currently imposes 1\% duty on propane imports, irrespective of where they come from, but now plans to raise it to 25\% for supplies from the US. The only comfort comes from the fact that Beijing has not yet announced when the proposed tax will be applied, leaving scope for talks between the two governments.

How important is US-China LPG trade?

Currently, China is the world’s biggest buyer of LPG. Not only have its imports grown strongly over the past five years, but its importance has also grown. China’s share of the global LPG trade stood at 20\% in 2017, substantially higher than the 6\% it had of a much smaller market in 2012.

Moreover, the US share of China’s LPG imports has also grown from zero in 2012 to 19\% in 2017. This strong long-haul trade on the US-China route has been a big source of employment for VLGCs over the past few years and so any reduction on this trade route will hit VLGCs the hardest.

Global LPG trade and China’s share (million tonnes)

Source: Drewry Maritime Research