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Russian LPG exports to China by rail are on course to surge this month as a result of growing consumption in the country, while demand from other importers slumps owing to Covid-19 restrictions.
Russian LPG producers applied to ship 120,800t of LPG to China at the Zabaikalsk-Manchuria border crossing in April, with state-owned railway operator RZD permitting 78,830t of this (see table). This is more than 10 times higher than in any month since rail exports to China began in earnest in August last year.
China's domestic LPG demand has started recovering as the government eases nationwide lockdowns to contain the virus' spread. But consumption in other key importers of Russian supply, such as Poland, has fallen sharply as a result of restrictions on movement. The crash in regional and domestic LPG prices has made Russian exports to China — where prices have been supported by stronger demand — increasingly attractive, a Russian LPG producer said.
The final export figure for April is likely to be lower as producers readjust programmes over the month, according to traders. Russia only shipped 20,400t to China over 6-20 April — 12,100t for the state-controlled Gazprom's Surgut gas processing plant and 7,400t from Russian upstream firm Irkutsk Oil.
Rail exports to China became possible following the start-up of the 1.8mn t/yr Manzhouli Far East Gas LPG and propylene terminal on the border in May 2018 — a joint venture between Russia's Avestra and China's Harbin Railway. But shipments on the route only began in August 2019 as a result of a delay securing permits to receive LPG at Manchuria rail station. Exports to the Manzhouli terminal have not exceeded 10,000t in any month since.
The huge increase in shipments in April is not expected to create logistical problems in west Siberia owing to the large number of available railcars and reduced rail traffic during the travel restrictions, market participants said.
The terminal has 10 spherical storage tanks, each capable of holding 2,000 m³ (1,200t) — six for butane, four for propane, propylene and propane-butane mix. Avestra and Harbin Railway plan to expand the terminal by 3mn t/yr by 2021-22.
LPG on the route is sold on cpt Zabaykalsk basis, using a formula referencing the ex-Daqing price or Argus Far East Index.
This article first appeared on www.argusmedia.com
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