China Never Imported This From America Before

Not to beat the China theme to death. But another recent news item from the country is central to one of the biggest themes going in commodities right now.

That’s a shift in the global market for natural gas liquids.

I’ve talked a lot recently about how the U.S. is awash in new production of liquids like propane. Creating a major arbitrage opportunity for exporters to sell this supply into Europe and Asia.

Buyers globally are moving to capitalize on this new source. And last week we saw China step into the market in a significant way.

Reports suggest that two major Chinese petrochemical companies completed import supply contracts this month. With at least one of them involving significant volumes of propane coming out of the U.S.

That buyer—Zhejiang Satellite Petrochemical Company—is said to be looking at 198,000 tonnes of propane imports through 2014.

That’s now the fifth deal that’s been concluded to bring American propane into China. A stat that shows just how fast Chinese demand is growing—driven by construction of new petrochemical facilities in the country. And how attractive U.S. supply is for these burgeoning operations.

The numbers here bode very well for U.S. propane exporters. With estimates being that overall Chinese demand could rise to 220,000 barrels per day. Representing over 50% of overall U.S. export capacity.

This is a major new slug of demand coming into the market. At a time when American suppliers have lots of product to sell.

It’s a great time to consider investments in midstream suppliers and export operators in this space.

Here’s to buying American,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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