The global supply tightened suddenly, and the futures and spot prices of LPG rose in tandem.

Since March 2026, domestic liquefied petroleum gas (LPG) futures prices have seen an upward trend. The main 2605 contract has risen from around 4,500 yuan per ton to a high of 7,244 yuan per ton on March 23, with a cumulative increase of over 60%. The core driver of this round of upward trend is not the peak season of domestic demand, but rather the severe disruption to the global supply side caused by the escalation of conflicts in the Middle East, damage to key energy facilities, and the obstruction of shipping in the Strait of Hormuz. As the world's largest importer of LPG, China has a high degree of dependence on foreign sources. The sudden change in the international supply pattern is directly transmitted to the domestic market through import costs and trade flows.

Supply in the Middle East tightened suddenly

The global LPG supply is characterized by a dual core of the Middle East and the United States, with Russia and Australia as auxiliary sources. In the first quarter of 2026, the supply side shifted from a loose expectation to a substantial tightening, with geopolitical conflicts and facility malfunctions becoming the dominant variables, and supply elasticity significantly declining. The combination of conflicts and malfunctions in the Middle East led to a sudden tightening of supply, becoming the core "fuse" of the market situation. The Middle East is the core export region for global LPG, accounting for approximately 40% of global trade volume. The Persian Gulf route carries about 30% of the global LPG seaborne trade volume, and the Strait of Hormuz is regarded as the throat of global LPG trade. From late February to March 2026, a series of supply shock events occurred in the Middle East, completely reversing market expectations.

Firstly, a force majeure was declared due to a malfunction at Saudi Arabia's natural gas liquids (NGL) facilities. The Juaymah NGL processing unit in Saudi Arabia suddenly broke down, and the authorities officially declared a force majeure. As a result, the March shipment plan was significantly reduced, with a monthly supply loss of 400,000 to 500,000 tons. This directly led to a tightening of long-term contract and spot supplies in the Middle East, causing the CP price to rise rapidly.

Secondly, the escalation of geopolitical conflicts has led to energy facilities becoming targets of attack. Since mid-March, the military actions of the United States and Israel against Iran have intensified. The South Pars gas field and energy facilities in the port of Bandar Abbas in Iran have been attacked, causing Iran's LPG exports to nearly come to a standstill. Data shows that Iran is the world's fourth-largest LPG exporter, with an average monthly shipment volume of about 900,000 tons. In March 2026, the shipment volume dropped sharply to 300,000 tons, showing a significant month-on-month decline and a notable year-on-year decrease, which has had a considerable impact on the Asian market.

Finally, shipping through the Strait of Hormuz was disrupted. After the conflict escalated, the volume of ships passing through the Strait of Hormuz dropped to nearly zero. The average monthly LPG shipment volume in the Persian Gulf region was about 3.85 million tons, accounting for about 30% of global trade volume. The disruption of shipping led to a substantial division of global trade flows, with a scarcity of spot vessel cargoes and a tightening of expectations for future arrivals.

In terms of total supply, the LPG shipment volume from the Middle East in March is expected to be approximately 2.9 million tons, a decrease of around 800,000 tons compared to the previous month and a drop of about 1.7 million tons year-on-year. The contraction in supply has reached a new high for the same period in recent years. The three core exporting countries, Saudi Arabia, Qatar, and Iran, are all facing supply constraints. Among them, some of Qatar's liquefied natural gas (LNG) facilities that produce NGL have been affected, leading to a temporary decline in LPG co-production capacity. The Middle East has become a high-risk area, and the premium on the supply side has comprehensively pushed up international prices.

U.S. exports are expected to increase.

The United States is the world's largest producer and exporter of LPG, and its NGL production capacity is continuously expanding, making it a core alternative source after the supply contraction in the Middle East. In January and February 2026, due to the winter cold wave, the operation of oil and gas facilities in the United States was temporarily suspended, causing a short-term decline in LPG production and exports. The shipment volume in February was approximately 5.43 million tons, a decrease of 0.66 million tons compared to the previous month. As the cold wave's impact subsided in March, all NGL facilities in the United States resumed full production, and export terminals operated at full capacity. The LPG shipment volume in March is expected to rise to around 7 million tons, an increase of 1.57 million tons compared to the previous month and 1.13 million tons compared to the same period last year. Shipments to China also rebounded simultaneously, making it the main source of supplementary supplies in the Asian market.

From the perspective of the production capacity cycle, the NGL separation and export terminals along the US Gulf Coast have been continuously expanding. By 2026, the LPG export capacity will exceed 180 million tons, and propane production will account for nearly 30% of the total NGL output. The long-term supply growth is highly certain. However, in the short term, US exports are restricted by shipping schedules, freight rates, and the purchasing rhythm in Asia, and thus cannot fully offset the supply gap in the Middle East. Meanwhile, international shipping freight rates have risen rapidly after the outbreak of the geopolitical conflict, with the freight rate increase on the route from the US Gulf Coast to Asia exceeding 20%, further pushing up import costs and weakening the price advantage of US supplies.

The increase in production from other regions is limited.

The supply from regions such as Russia, Australia and Africa remains stable with limited growth. The LPG output in Russia mainly serves the domestic chemical industry and the European market, with relatively low exports to Asia. In Australia, LPG is mainly a by-product of LNG, and its production is stable as LNG projects operate smoothly. Exports are mainly under long-term contracts, with weak spot market adjustment capacity. Africa has a small production scale and high logistics costs, exerting a negligible influence on the global trade pattern. Overall, regions other than the United States and the Middle East lack supply flexibility and cannot provide effective increments to the global market. The global LPG supply is highly concentrated.

The global trade flow is being restructured

  The supply disruption in the Middle East has led to a reconfiguration of the global LPG trade flow, with inventories shifting from accumulation to structural reduction, and trade imbalances intensifying price fluctuations. Before March 2026, long-term contract goods from the Middle East will be stably supplied to markets such as China and South Korea. After the outbreak of the Middle East conflict, the supply of spot goods in the Middle East was almost cut off, and the delivery of long-term contract goods was delayed. Asian buyers were forced to turn to sources from the United States and Africa. The proportion of US exports to Asia rapidly rose from 30% to over 40%, and the trade flow was completely restructured. Shipping schedule data shows that the volume of LPG arriving at Chinese ports in March 2026 is expected to be approximately 2.67 million tons, an increase of 330,000 tons compared with the previous month and a decrease of 280,000 tons compared with the same period last year. The month-on-month increase in arrivals mainly came from the United States, while arrivals from the Middle East decreased significantly. The import dependence in South China exceeds 80%, and the proportion of goods from the Middle East is as high as 83%. It has been most severely impacted, with spot prices leading the national increase.

   Global LPG inventories are at a moderately low level. Data from the U.S. Energy Information Administration (EIA) shows that propane inventories in the United States in the first quarter of 2026 were below the five-year average for the same period. After destocking during the peak consumption season, replenishment was slow, and there was a lack of inventory "buffer". In terms of port inventories in Asia, as of March 19th, the sample inventory of LPG at major domestic ports in China was approximately 2.3238 million tons, accumulating slightly compared to the previous period, but still lower than the levels in the same period of 2024 and 2025, remaining at a medium level in recent years. The inventory structure shows the characteristics of "high explicit inventory and low circulating inventory". Importers' reluctance to sell leads to tight spot circulation volume, increasing the difficulty for downstream enterprises to obtain goods. The inventory pressure is concentrated in the trade link rather than the terminal consumption link. This structural tension further amplifies price fluctuations.

Summary and Outlook

  In the second quarter of 2026, the core contradiction in the LPG market will still be the disturbance to the supply side caused by the geopolitical situation in the Middle East. Changes in the supply side will continue to dominate the price trend, and the demand side will gradually enter the peak season. The supply and demand pattern is expected to be gradually restored. If the conflict in the Middle East eases, the Strait of Hormuz resumes navigation, and the NGL facilities in Saudi Arabia and Iran are repaired, the export of LPG from the Middle East will rebound rapidly, the global supply gap will narrow, international prices will fall from their high levels, domestic import costs will decline, and futures prices will face downward pressure. If the conflict continues to escalate and energy facilities continue to be damaged, global supply will remain tight for a long time and prices will remain at a high level with fluctuations. On the demand side, in the second half of the second quarter, summer arrived in the Northern Hemisphere. The demand for civilian combustion remained stable, while the demand for the chemical industry gradually picked up as downstream sectors resumed work. The operating rate of PDH is expected to increase, and the demand for LPG is gradually entering its peak season. The demand side will provide support for prices and alleviate the pressure of price correction after the supply premium fades. In the short term, the geopolitical conflict in the Middle East has not eased, the supply premium still exists, and the LPG price remains in a relatively strong pattern. In the medium and long term, if supply recovers, the LPG price will gradually return to its fundamentals due to the drag of the off-season for demand. Investors need to closely monitor core variables such as the progress of the Middle East conflict, shipping in the Strait of Hormuz, the repair of facilities in Saudi Arabia and Iran, the export volume of the United States, domestic arrivals and inventories, etc., to control the risk of price fluctuations and mainly engage in wave trading.

  Overall, the significant increase in domestic LPG prices since March 2026 is a concentrated manifestation of the fragility of the global energy supply pattern. The triple pressure of the Middle East geopolitical conflict, the failure of key facilities and the obstruction of shipping channels has pushed the fundamentals of the LPG market from loose to tight, highlighting the structural feature of China's LPG market being highly dependent on international supply. In the future, the global LPG supply pattern will continue to be restructured. The increase in the supply share of the United States, the normalization of supply risks in the Middle East, and the diversification of trade flows will become long-term trends. For domestic products.