Let's Get Physical

In October, some 45 MMbbl of liquefied petroleum gases (LPGs) were loaded onto ships and sent out from U.S. ports, more than 80% of it from Texas Gulf Coast terminals. Most propane and normal butane exports are tied to long-term deals between U.S. suppliers and overseas buyers, but a substantial share involves third-party LPG traders who cut deals to buy LPG, arrange for shipping and terminaling, then sell the LPG to buyers in distant lands. How exactly does all this happen? Today, we continue a series on how U.S.-sourced LPG makes its way to Asia, Europe and other key export markets.

U.S. LPG export volumes have climbed to astronomical levels this year. Almost 60% of U.S. propane production, or about 1.3 MMb/d on average so far in 2019, along with a sizable volume of butane, is being shipped to overseas markets, mostly to Asia. As anyone who’s talked shop with an LPG trader knows, international trading of propane and butane (collectively LPGs — Liquified Petroleum Gas) is a wild, roller-coaster kind of business. But how exactly does it all work? How do the players involved acquire the volumes, cut the deals with export dock owners, arrange for shipping and sell the cargoes to buyers? And, most importantly, how do these shippers make money? Today, we begin a series on international LPG trading that looks behind the curtain and drills down into the nuances that make the difference between success and failure in this traditionally opaque world.