LPG import recovery faces hurdles despite strong July gains

in Freight News 28/07/2026

Global LPG markets began July with cautious optimism. Seaborne LPG imports were moving back toward seasonal norms, supported by record export volumes from the US that helped offset months of disruption caused by conflict in the Middle East Gulf. That recovery was short-lived. On July 7, the failure of the US-Iran ceasefire led to the effective closure of the Strait of Hormuz, shifting the key question from how fast the market could recover to whether a recovery could happen at all.

Global LPG import volumes fell sharply from late January as the conflict escalated, then began a gradual recovery through the second quarter. Preliminary July data for days 1-22 showed imports rising above the 5-year average, driven almost entirely by a surge in US Gulf Coast and Middle East Gulf loadings. The renewed closure of Hormuz now puts the Middle East Gulf portion of that recovery at risk heading into August, unless alternative supply routes can make up the difference. That matters because LPG is a globally traded fuel and petrochemical feedstock, so even short-lived supply interruptions can quickly redirect cargoes across regions and tighten the balance in consuming markets.

The US has become the market’s safety valve

The US Gulf Coast has served as the global LPG market’s backstop throughout the conflict. Through July 1-25, US-origin arrivals reached a record of about 2.9 million barrels per day globally, with Northeast Asia taking the largest increase in volume, up roughly 110,000 barrels per day month on month, led by strong flows into both China and India.

On the supply side, PADD 3 terminal throughput declined in July for days 1-21, most notably at Enterprise Houston Terminal. At the same time, widening C4/C3 spreads are pointing to stronger butane exports in August, creating an additional opportunity for US exporters beyond propane. For most of June, the arbitrage to Asia remained closed, but it has more recently turned favorable, keeping the incentive to move barrels east clearly intact.

China’s LPG imports have been the clearest beneficiary of the supply reorientation. Supported by both US barrels and a brief window of Middle East Gulf volumes during the ceasefire period, China’s imports climbed to about 1.4 million barrels per day in July, a seasonal high for 2026 and close to pre-conflict levels. Iranian volumes added further support while the ceasefire held, although their contribution remains difficult to quantify precisely because sanctioned trade is opaque. For Chinese importers, the immediate significance is that access to seaborne supply has remained available even as regional flows were disrupted, helping cushion the effect on industrial users and downstream buyers.

India’s recovery has been more measured, but still significant. Imports reached the 5-year average in July, driven overwhelmingly by US-origin flows to both the eastern and western coasts of the country, partially offsetting the loss of nearby Middle East Gulf supply that India has historically relied on. Those flows are expected to continue in the coming months, particularly as India’s industrial LPG consumption enters a seasonally stronger period.

Petrochemical demand shows a mixed picture

For the petrochemical sector, the picture is mixed. Asian PDH operators lifted run rates in July after the earlier supply shock, but margins weakened at the same time as higher feedstock prices eroded profitability. Propane-naphtha swaps in Northeast Asia remain well below the -$50 per tonne switching threshold, meaning the forward curve continues to favor propane over naphtha as cracker feedstock. Even so, the gap between propane’s cost advantage and the economics of running on it is narrowing.

The central question for global LPG markets heading into August is whether mainstream Middle East Gulf exports can resume, and if so, how quickly. Under the current Hormuz closure scenario, global LPG imports are expected to remain below seasonal averages, with the US Gulf Coast continuing to carry the bulk of global supply. The US-Asia arbitrage remains open via the Panama Canal for about one month forward, providing a near-term commercial incentive.

For now, market participants are pricing in continued disruption, with the situation in Hormuz the single most important variable in the global LPG balance.

Source: Vortexa