Four numbers first. RIM Intelligence's 5-9 October weekly shows the CFR Far East market pushed sharply higher by crude strength: the Japan Index at $957.75/t for propane and $1,107.75/t for butane; the China Index (with petrochemical buyers returning after the National Day holiday) at $1,055.75/t propane and $1,205.75/t butane. Domestic daily tracking corroborates: propane CIF Japan assessments ran at $923-945/t over 9-15 October, with the October CP (Saudi contract price) forecast around $710/t. At these levels Japanese importers' landed costs are materially above most of the year - and the winter heating season has only just begun.
The propane-butane spread direction is the real story. Winter heating demand usually puts propane first, yet this cycle butane carries roughly a $150/t premium over propane on the Japan Index. Butane's strength draws on two threads: crude-led repricing of the entire LPG complex, and - with CFR Japan naphtha holding near the $976/t levels we have previously tracked - butane's improving substitution economics as a cracking feedstock against expensive naphtha, with petrochemical bidding lifting butane. RIM also notes active propane cargo deals in the CFR Japan market: importers had hoped to avoid expensive prompt cargoes and delay purchases, but low domestic inventories forced entry - the classic low-stock, high-price dilemma where waiting only gets more expensive.
The supply side is equally concrete. Kuwait Petroleum Corporation sold a 44,000 mt 50:50 propane-butane cargo for second-half October delivery via a tender closing 6 October, then issued a fresh tender for a 44,000 mt 75:25 cargo closing 12 October; QatarEnergy offered selected customers roughly 24,000 mt of propane plus 26,000 mt of butane for STS (ship-to-ship) delivery within the 13-23 October window. Middle Eastern sellers are raising the propane share (75:25) and locking STS delivery, confirming that rerouting and transshipment remain the operational norm. Regionally, on an FOB South China basis bids were heard at about a $400/t premium to the October CP against offers at +$420-450/t - a still-wide bid-ask that needs time to converge. The backdrop: Chinese LPG burning demand is in the off-season with high costs passing through only slowly, while the external market is supported by supply disruptions, tight shipping capacity and winter stocking - a firmly "strong outside, weak inside" pattern not easily broken in the short run.
What it means for SNSUC. LPG is within the company's touchable categories and outside the hazardous-chemical exclusion list. First, LPG quotations into Japan should anchor on both the CP contract price and FEI/CFR Japan spot - this cycle's wide scissors between them (CP forecast near $710 versus spot of $930-960) means long-contract and spot procurement must be valued separately. Second, the butane premium signals that when naphtha cracking economics are stressed, Japanese petrochemical butane demand amplifies price elasticity - LPG-naphtha spreads belong in the cost models for our base-oil and lubricant-chain customers. Third, the Japanese importers' pattern of forced restocking from low inventories weakens their negotiating position; within the winter window, batched short-cycle volume locking fits their procurement rhythm better than a single large contract. This article is market observation based on public data and does not constitute investment advice.
Author: Qiu Binbin (Shanghai New Shell Union Chemical Co., Ltd.)
