After being hit by the trade war and U.S. sanctions on Iran, some Chinese buyers of liquefied petroleum gas from the Persian Gulf nation are finding it’s too tough a habit to kick.
China sourced around a fifth of its LPG -- used as cooking fuel, in cigarette lighters and to make plastic -- from the U.S before Beijing slapped a 25% tariff on the gas last August as the trade tussle heated up. Buyers then turned to Iran, which accounted for around a third of imports in April, before President Donald Trump blocked all energy exports from the country in May.
But some Chinese customers are still buying from Iran, according to Kpler SAS. Based on ship-tracking data, the Paris-based energy researcher estimates that at least five supertankers loaded Iranian LPG in May and June that was destined for China. That would equate to around $100 million of the gas, according to Bloomberg calculations.
“They’ve started using a variety of techniques to hide their activity,” Ilya Niklyaev, an LPG analyst at Kpler, said in an interview. “Like switching off transponders as well as intentionally signaling wrong destinations and indicating loading ports in Qatar, Saudi Arabia or the U.A.E.”
China took 346,000 tons, or 80%, of Iran’s LPG exports in May, Kpler estimated. If the cargoes loaded before the end of the U.S.
waivers on May 2 they may not have been in contravention of the sanctions. Iran is likely to export a total of 400,000-500,000 tons in June with at least eight supertankers set to load the fuel in coming weeks, Kpler said in the note. Three supertankers have loaded LPG from Iran in June, of which at least one is headed for China, it said.
Kpler and Chinese customs figures show similar overall LPG import data for the past year. But while the Kpler numbers show a sizable portion coming from Iran, the Chinese data has no cargoes from the Persian Gulf nation since mid-2017.
Iranian LPG supplies have been among the cheapest in the world as customers from Japan to South Korea turned away from doing business with the country following the U.S. sanctions. China could turn to other suppliers, like Qatar and Saudi Arabia, but it would be more expensive.