The growth of LPG trade is projected to be hindered in 2025 due to limitations in US terminal capacities. Recent developments have led to export terminals reaching their full capacity, largely influenced by the surge in NGL production in the US and stagnant domestic demand. Despite rising inventory levels, robust demand from propane dehydrogenation (PDH) plants in China helped US exports soar by 13.7% in 2024, totaling 65.7 million tonnes.
The overpressure on terminals, coupled with weather and maintenance delays, resulted in skyrocketing terminal fees, which reached an all-time high of $165 per tonne for VLGC loadings at US Gulf Coast export terminals by September 2024. These rising fees have constricted the US-Asia arbitrage due to increased overhead costs. However, despite low Mt.
Belvieu propane prices and fluctuating VLGC spot rates, the arbitrage has remained narrow but volatile. Weather-related disruptions further complicate market dynamics. The prices at Mt.
Belvieu can experience sharp fluctuations, as seen in January when they increased by 15% due to a cold snap affecting vessel loadings. Additionally, storms and hurricanes throughout the spring and summer months delayed shipments and caused premiums on spot cargoes to rise. To combat growing demand and infrastructure strains, several terminal expansions are currently underway.
Energy Transfer plans to add 250 kbpd of NGL export capacity at its Nederland terminal by mid-2025, while Enterprise Products is working on a new LPG and ethane terminal along the Neches River, expected to be operational by the end of 2025. These expansions reflect a strategic shift towards enhancing ethane export capacity while maintaining flexibility in loading between propane, butane, and ethane. Nevertheless, while these expansions may increase terminal capacity, the expected rate of export growth will likely continue to outstrip the pace of capacity enhancements in the near term.
As a result, high terminal fees are anticipated to persist in the early half of 2025, leading to constrained US exports and LPG supply. This situation could exacerbate the vessel surplus in the VLGC market, impacting rates and overall trade dynamics. In summary, the challenges faced in the US LPG market are multifaceted, with terminal capacity limitations, high fees, and potential geopolitical tensions affecting exports and future market growth.
The outlook becomes particularly uncertain if tariffs between the US and China escalate, as this could drastically alter import patterns and reduce demand for US LPG.