IEA: Global LPG Markets Struggle to Replace Disrupted Supply

Why It Matters

The supply gap threatens downstream industries that rely on propane and butane, from cooking fuel to plastics manufacturing, and highlights the strategic vulnerability of global LPG markets to geopolitical chokepoints.

Key Takeaways

• US LPG exports rose 450,000 b/d, now 69% of global supply
• Hormuz disruption cut Gulf LPG flow from 1.5 to 270,000 b/d
• India’s LPG arrivals dropped >40%, demand fell 16% in April
• Export‑terminal capacity limits further US LPG shipments
• Petrochemical feedstock flexibility cushions short‑term plastic shortages

Pulse Analysis

The Strait of Hormuz has long been a linchpin for the world’s LPG trade, funneling nearly a million barrels daily to Asian consumers. When geopolitical tensions throttled those flows to a fraction of their 2025 levels, the International Energy Agency warned of a looming supply crunch. The United States, leveraging its shale‑driven propane surplus, accelerated exports by 20%, lifting its share of global seaborne LPG to roughly two‑thirds. While this surge mitigated the immediate shortfall, the market still faces a deficit of about one million barrels per day that other exporters have struggled to fill.

A critical bottleneck now lies in export‑terminal capacity, especially facilities equipped for ethane‑propane flexibility. Many U.S. terminals prioritize ethane for petrochemical feedstocks, leaving propane—used for heating, cooking and as a feedstock for plastics—constrained. This dynamic underscores the delicate balance between petrochemical demand and fuel markets. Moreover, the IEA notes that China’s ability to switch between feedstocks has temporarily softened the impact on polymer inventories, but dwindling stocks could soon pressure manufacturers of plastics, fibers, and construction materials.

India exemplifies the downstream fallout. Proximity to Hormuz meant its LPG imports plummeted by more than 40% in April, driving a 16% dip in domestic demand for cooking fuel. The government’s rapid interventions aim to stabilize retail prices, yet the four‑week lead time for alternative cargoes limits relief. As global LPG markets grapple with supply‑side constraints, stakeholders—from energy traders to manufacturers—must monitor terminal upgrades, alternative routing options, and policy responses that could reshape the balance of trade in this essential commodity.