Wanhua LPG Supply Position
Wanhua Chemical's term deal with Tasweeq lifts China's imports of Qatar LPG
Singapore (Platts)–20 Apr 2016 447 am EDT/847 GMT
A term contract between Chinese propane dehydrogenation plant operator Wanhua Chemical Group and Qatar International Petroleum Marketing Company Ltd., or Tasweeq, for 2016 contributed to the jump in LPG imports from Qatar in January and February, traders said this week.
China imported 201,406 mt of LPG from Qatar in the first two months of this year — 50,315 mt in January and 151,091 mt in February, data from the General Administration of Customs showed.
In January last year, China imported 22,955 mt of LPG while no cargoes were imported in February 2015.
The import data for March is due to be released later this week or early next week.
Traders said that Wanhua Chemical Group, formerly Yantai Wanhua Chemical, might be the only Chinese importer with a Tasweeq FOB contract this year, which is limited to one cargo per month.
Other Chinese importers buy spot LPG from Qatar via third-party trading companies on a CFR basis, they added.
Wanhua also has a CFR term contract with Turkish trader Bayegan for a 44,000 mt evenly split cargo per month or bi-monthly from Ruwais in the UAE, since last year, sources said.
According to cFlow, Platts trade flow software, the 53,800 dwt VLGC Chinook arrived at Yantai terminal in northeast China on April 3, after departing from Mesaieed (Umm Sa'id) in Qatar on March 16.
The 50,450 dwt G Arete arrived at Yantai on October 20 last year after loading a cargo from Ras Laffan on October 1, cFlow showed.
The only other shipment from Qatar that arrived at Yantai was in July 2014.
Overall, China imported 879,953 mt of LPG from Qatar in 2015, making the Middle Eastern producer the third biggest supplier after the UAE and the US, to the world's top LPG importer, customs data showed. This was up 53.6% from 572,868 mt in 2014.
Wanhua Chemical operates China's biggest PDH plant, which can process 900,000 mt/year of propane and 600,000 mt/year of butane and can produce 750,000 mt/year of propylene.
With current positive propylene margins, the plant is running at around 70% of capacity, sources said.
When margins were poor last year and early this year, Wanhua had shut its plants in December and then around January 19.
Even when it was operating, it was running at only 60-70% of capacity, sources said.
Wanhua also uses the imported LPG for trading. To balance its feedstock supply program, Wanhua had offered 23,000 mt of propane for H1 May delivery and later sold the cargo to Norway's Statoil at $355/mt, CFR basis, last Wednesday, sources said.
It offered a propane cargo for H2 May at $355/mt last Friday on the Asian physical market, and bid for a 23,000 mt butane lot for H2 May at May CP plus $22/mt.
It had also offered a 44,000 mt evenly split cargo in the Singapore physical market around early December.
Ratings agency Moody's Investors Service last month put on review for downgrade the Baa3 issuer rating of Wanhua Chemical Group and the Baa3 rating on the senior unsecured notes issued by Wanhua Chemical International Holding Co. and guaranteed by Wanhua Chemical.
This reflected Wanhua's weaker-than-expected operating performance for the year ended December 31, 2015, amid a slowdown in Chinese demand, the challenges the company faces in lowering its elevated debt levels over the next 12-18 months, as well as its worsening liquidity position, Moody's said. It expected Wanhua's revenue to remain under pressure due to weak demand in its end-user markets — construction, home appliances and other manufacturing sectors.
–Ramthan Hussain, firstname.lastname@example.org
–Edited by E Shailaja Nair, email@example.com
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