Butane prices in global markets have surged significantly, reaching their highest level in 30 years. In early November, butane prices in Northwest Europe reached $1125 per ton, surpassing previous highs following Russia's invasion of Ukraine. In Asia, the AFEI butane index reached $1180 per ton on November 3, and butane prices in the United States increased to $920 per ton, the highest level in 14 years.
Changes in Global Butane Trade
This price increase is due to several concurrent trends, the most significant of which is the change in global propane and butane trade flows since the onset of the U.S.-Iran war in March. Before this conflict, the United States accounted for about 45 to 50 percent of global LPG exports, while the Middle East supplied another 30 to 35 percent. Following the onset of the crisis in the Middle East, the share of Gulf countries dropped to 11 percent, and the United States has replaced many of these shortages, increasing its share to 65 percent.
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Impacts on the Asian and Indian Markets
Asia has absorbed a significant portion of this replacement supply. Middle Eastern producers previously supplied half of Asia's imports. However, from April to October, the United States supplied up to 75 percent of Asia's imports. Nevertheless, in October, butane imports to the Amsterdam-Rotterdam-Antwerp hub decreased to 130,000 tons, which is 34 percent less than last year.
Additionally, India has been severely affected. At the onset of the crisis, nearly 87 percent of the country's LPG imports came from the Gulf. India's LPG imports dropped from 2.03 million tons in February to 1.17 million tons in March, showing a decline of over 40 percent. The Indian government has instructed refineries to maximize LPG production, and producers have turned to producing piped natural gas.
In China, demand for butane is increasing due to rising production capacity of gasoline additives and basic chemicals. Five new methyl tert-butyl ether (MTBE) production plants will open in 2025, with a total capacity of 3.4 million tons per year, increasing the need for imported butane.
Finally, seasonal demand for butane in the winter in the United States and Europe has also impacted this price increase. Given these factors, pressure on the butane and LPG market is expected to continue in the near future.
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