US propane prices collapse as China imposes heavy tariffs

In Singapore, the recent escalation of tariffs between the US and China has rapidly altered the dynamics of their trade, especially concerning liquefied petroleum gas (LPG) and propane. Trade relations had previously flourished, with the US being a primary supplier of propane to China, which utilized the resource in industries such as heating and plastics. Following the new tariffs imposed by both nations in early April 2025, propane's price in the US has seen a significant drop as exports to China have become unfeasible. This abrupt change has left Chinese buyers scrambling for alternative sources, often facing inflated prices as traders capitalize on this sudden demand shift. The situation has been exacerbated by the rate of tariffs, which have made imports from the US economically unsustainable for Chinese propane dehydrogenation (PDH) plants. These facilities, crucial in converting propane into propylene for plastic production, were already struggling with reduced operational capacities due to economic slowdowns. With US exports valued at approximately $1 billion a month in recent years, and US supplies making up about 60% of China's total propane imports, the sudden incapacity to purchase American propane has forced Chinese importers to find other markets. Such a transition has revealed the vulnerability of the PDH sector, operating under thin margins. Chinese traders attempting to offload existing US propane cargoes have encountered significant challenges. Offers to switch to other sources have vastly exceeded earlier prices, with quotes reaching up to US$130 a tonne, four times their previous acceptability. Consequently, these economic pressures are leading some PDH plants to consider sourcing propane from the Middle East despite less suitability of these alternatives, particularly as Middle Eastern shipments often include butane, which is not optimal for their processing needs. Furthermore, the increased tariffs of 125% mean that the financial losses for processing American propane have steepened dramatically, leaving many facilities financially impractical if they continue their previous sourcing. In the face of these challenges, US exporters are beginning to explore new markets in Europe, and India is also being considered as a potential buyer if market prices continue to decrease. The ongoing situation has caused significant shifts in the global LPG market and highlights the interdependence between the US and China in this sector. The complexities surrounding these trade relationships, now strained by geopolitical tensions, threaten to reshape the landscape of the global propane market in the coming months, impacting not only prices but also availability and procurement strategies for companies dependent on this vital resource.