The Trump administration announced sweeping new tariffs on US imports late Wednesday (April 2), including a 10% tariff on imported goods plus ‘reciprocal’ tariffs on many trade partners. Markets fell sharply Thursday in response. Imported energy products are exempt from the reciprocal tariffs, but the actions raise the risk of retaliation that could put some exports at risk.
We can look to the recent past to understand what retaliatory tariffs can do to the US LPG export market. In August 2018, China imposed a 25% tariff on US propane as part of its retaliation against US tariffs during the US-China trade war in 2018-19. Propane exports to China fell from 200 Mb/d in Oct ’17 to zero by Feb ’18 (see the blue bars in the chart).
The change to trade policy introduced uncertainty and volatility into the market, yet overall LPG exports grew by 183 Mb/d (+20%) from 2017 to 2019. US propane exports increased by 158 Mb/d (+75%) over that same period as other countries like South Korea, Taiwan and Indonesia imported more US propane. As for China, the country met its own demand from a growing number of propane dehydrogenation (PDH) facilities in the Middle East, including in Saudi Arabia, the United Arab Emirates and Qatar.
In the end, the trade war introduced volatility into a fast-growing global market for propane, and East Daley Analytics believes we can expect the same themes if tariffs begin to target energy. The stakes are higher now, as the latest tariffs target many trade partners rather than China alone. The larger concern, reflected in the 4-6% drop in stock indices Thursday, is dampened economic growth. Escalating tariffs can increase transportation and logistics costs and contribute to a higher inflationary environment.
See East Daley’s Propane Supply & Demand Report for more information. Our recent presentation at the OPIS NGL conference is also available now for clients in Energy Data Studio. – Rob Wilson, CFA.
NEW NGL Webinar – Fueling the NGL Surge: Growth Across Key Basins, Infrastructure, and Midstream Advantage
Join East Daley on April 16 at 10 AM MST for an in-depth webinar on the NGL market. In Fueling the NGL Surge: Growth Across Key Basins, Infrastructure, and Midstream Advantage, we will cover basin growth and key producers, infrastructure and midstream players, and explore the growing linkage between crude oil, natural gas and NGL markets. Sign up now to attend.
East Daley is Attending the Southeast LDC Gas Forum April 15-17
Come see East Daley Analytics speak at the Southeast LDC Gas Forum in Atlanta, GA, April 15-17, to gain expert insights into natural gas market trends and strategic investment opportunities. Register here to attend the Southeast LDC Gas Forum.
Data Center Demand Monitor - Available Now!
Introducing Data Center Demand Monitor by East Daley Analytics. This is your go-to source for tracking data center projects and demand. We monitor and visualize nearly 300 US data center projects. Use Data Center Demand Monitor to forecast demand, identify pipeline corridors and track data center projects. — Request your demo now of the Data Center Demand Monitor!
The Daley Note
Subscribe to The Daley Note (TDN) for midstream insights delivered daily to your inbox. The Daley Note covers news, commodity prices, security prices and EDA research likely to affect markets in the short term.
-1.png)