Geopolitical tensions have driven spot LPG price differentials to a record $250 per ton. India and China are increasing imports from the US to offset supply shortages from the Gulf region.

Asia's largest liquefied petroleum gas (LPG) importers, led by India and China, are urgently diversifying their supply sources from the Americas to replace shortfalls from the Middle East. Geopolitical tensions in the Gulf region have caused a sharp decline in LPG exports from the area, pushing spot prices to record highs and putting direct pressure on the petrochemical industry and the cost of living for consumers.

Spot price spreads hit a record high.

According to data from analytics firm Kpler, LPG exports from the Middle East have fallen by 73%, to 419,000 barrels per day in March 2026. This supply shortage has pushed the spot price premium for propane and butane for April 2026 delivery from the Gulf region to a record high of $250 per ton compared to Saudi Aramco's contract price.

Saudi Aramco also significantly increased its official selling price (CP) in April 2026. Specifically, the price changes are as follows:

Vasudev Balagopal, head of petrochemical trading at Marex, said key importing countries are actively seeking alternative sources of supply from the US, Norway, and Canada to fill the gap left by the Middle East.

US exports to Asia reach record levels.

To meet urgent demand in Asia, US LPG exports are projected to reach a record 2.7 million barrels per day in April 2026. Of that, approximately 1.8 million barrels per day will be shipped to Asian markets, a 14% increase from the previous month. This shift in trade flows has caused transaction fees at US Gulf ports to surge, with propane reaching $273.5 per ton and butane reaching $240.1 per ton on March 19th.

However, experts warn that the US is unlikely to completely replace supplies from the Middle East. Greg Bower, a broker at New Stone, noted that US export ports are already operating near maximum capacity. Furthermore, logistical barriers pose a significant challenge, with shipping times from the US to Asia exceeding 30 days, double the approximately two-week journey from the Middle East.

Consequences for industrial production and consumption

Supply shortages and rising prices have forced businesses in Asia to adjust their production plans. In China, propane dehydrogenation (PDH) plants are expected to further reduce their operating capacity by 5 percentage points in April 2026 due to low profit margins and feedstock shortages.

In India, demand for LPG for cooking decreased by approximately 205,000 barrels per day in March 2026. Although the situation is gradually improving thanks to shipments from Argentina and the US starting to arrive at ports, Rystad Energy forecasts that India's LPG demand may only begin to recover gradually from April, but will still remain lower than the same period last year.

By 2025, the Middle East will remain dominant, supplying 48% of Asia's total LPG imports (equivalent to 1.54 million barrels/day), while the US will account for approximately 39% (1.26 million barrels/day). Disruptions to the strategic shipping route through the Strait of Hormuz are currently the biggest risk factor to the region's energy security in the short term.

Source: Vietnam.vn