China’s LPG market has experienced sharp swings in 2025, shaped by tariff disputes, volatile petrochemical margins and shifting supply sources, according to Drewry.
After import volumes fell in June, recovery began in July, driven by stronger feedstock demand from propane dehydrogenation (PDH) plants and temporary relief from geopolitical pressures, following the second 90-day suspension of US–China tariffs in August.
Shipping rates reflected the change, with vessel availability tightening and freight costs rising on US–Japan and Arabian Gulf–Japan routes. Still, doubts persist over the durability of the rebound as petrochemical margins remain compressed and tariff risks continue.
The April escalation of US–China tariffs disrupted China’s petrochemical sector, where more than half of LPG imports originate from the US. The tariff announcement triggered reduced operating rates and shutdowns at North China crackers dependent on US cargoes, while other steam crackers switched to naphtha. Buyers turned to Middle Eastern and Canadian suppliers, but premiums on these alternatives intensified negative margins, especially for smaller and less efficient crackers.
By June, China’s LPG imports fell sharply, and the US share dropped to 12% from 59% in February. A 90-day tariff pause lowered China’s retaliatory tariff on US LPG from 125% to 10% and led to a modest recovery, with the US share rising to 17% in July. The extension of the pause is expected to encourage further Chinese purchases of US cargoes.
Market conditions were also shaped by additional global supply. Higher output from the Middle East, following the reversal of OPEC+ production cuts, and the commissioning of new US terminal capacities supported lower prices and stronger fixing activity. Despite higher spot freight rates, China’s landed prices remained low, bolstering sentiment and seaborne trade.
However, the rebound faces structural and seasonal challenges. Narrowing US–Asia arbitrage, Panama Canal congestion and longer voyages around the Cape of Good Hope could restrict flows. Domestic LPG demand grew by just 1% year on year in January–July, the weakest since 2019, despite the start-up of three PDH units—Guoheng Chemical’s 0.6 mtpa plant in Fujian, Wanhua’s 0.9 mtpa facility in Shandong and Zhongjing Petrochemical Phase 3’s 1 mtpa facility in Fujian.
Shutdowns at small-scale PDH units, reduced third-party propane sales from terminals and substitution of LPG with naphtha at some crackers contributed to the stagnation.
Risks to the recovery include weaker PDH margins, seasonal declines in MTBE demand, continued tariff uncertainty and geopolitical volatility. China’s reliance on Iranian LPG, which accounted for 15% of 2024 imports, further exposes the market to sanction risks. In shipping, the realignment of trade routes after the April tariff escalation temporarily boosted very large gas carrier (VLGC) earnings as tonnage availability tightened. The subsequent shift back to Middle Eastern supply and renewed US liftings kept rates elevated in June–July. A continuation of the US–China trade recovery could support spot earnings for the remainder of 2025, although fleet oversupply and slower global demand growth remain structural headwinds.
Overall, China’s LPG imports are projected to grow only 2% in 2025. The sector’s trajectory will depend on trade policy decisions, feedstock economics and supply dynamics, while volatility is expected to remain the defining feature of the VLGC market.