LIQUIFIED petroleum gas carriers are poised for increased tonne-mile demand and lower rates as Chinese importers look at raising imports from the US amid the turmoil in the Strait of Hormuz.

LPG carrier time charter equivalent rates have started correcting after an initial rise spurred by the attacks on Iran over the weekend.

Rates crossed the $100,000 per day mark on March 2, rising by more than 50% since last Friday on the Baltic Exchange’s BLPG1 index for sailings from the Middle East to Japan.

BLPG3 TCE rates for sailings from the US Gulf to Japan rose 14% to $83,717 per day on March 2.

But the TCEs on both routes have since declined slightly, with the BLPG1 index falling by almost 20% and the BLPG3 index falling by around 8% on March 3.

Further volatilities are expected in LPG carrier rates with the continued turmoil in the SOH.

The Middle East is a key exporter of LPG, with 40% of global LPG supply passing through the SOH, according to maritime analytics firm Drewry. It expects around 400,000 tonnes per week of LPG flows to be affected. This could climb up to 8m tonnes by March or April.

Some 20% of Middle East exports flowed to China between January 2023 and February 2026, according to Vortexa data. The top export destination for the Middle East is India, with 57.9% of LPG exports heading there.

China, in the past three years, imported 41% of its LPG requirements from the US, with Iran being the second highest import origin, making up 25%.

The closure in the SOH will effectively see China lose access to 45.8% of its imports after accounting for cargoes from the UAE, Kuwait, Qatar and Saudi Arabia.

China hunts for alternatives

The lack of flows from the Middle East will force China to look for alternative sources for LPG imports. Propane, a key component of LPG, is used mainly by China’s industrial sector.

The increase in propane dehydrogenation plants (PDH) in the last few years has supported more LPG imports, even in the wake of last year’s tariff turbulence according to commodity price agency Argus Media.

With the SOH turmoil, Chinese importers are now forced to look at alternatives.

In crude oil markets, China could look to Russia to replace Middle East barrels as deeply discounted Urals make a compelling value proposition. But the situation is different for LPG.

“A Russian LPG producer told me that they do not have sufficient VLGCs to export LPG to China after I made an enquiry,” a Chinese insider told Lloyd’s List. He added that there was only one vessel currently in operation, along with a few smaller vessels that would not be sufficient to carry the volumes required.

PDH players will likely look at importing LPG from the US Gulf Coast instead, as cargo and fleet availability is higher. “The rule of thumb is that PDH plants in the east and west will import US cargoes while those in the north and south import Middle East cargoes,” he added.

The current supply shock will likely force some PDH plants to close, with production rates already decreasing as they prepare to shut down operations.

Importing LPG from the US will see a rise in tonne-mile demand for LPG carriers. The magnitude of this shift will depend on how the Iran situation plays out.

According to the insider, PDH players will likely continue importing USGC cargoes for a month before margins collapse from higher production costs and continued weak end-product prices.

Higher costs will stem from increased shipping costs for importing cargoes from a further origin, and increased LPG prices. The Argus Far East Index benchmark for propane, a component of LPG, rose by 17% to $657 per tonne on March 2.

Because of this, LPG carriers will have a brief window to capitalise the rise in tonne-mile demand.

Inventories at Chinese PDH plants are currently full, with most plants recently receiving cargoes for delivery in the first half of March. But concerns remain for vessels that are supposed to deliver LPG cargoes in the second half of the month.

“The vessels have yet to load up on Middle East LPG as initially planned. We are not sure of what to expect next, but we are also not making any knee-jerk reactions,” the insider added.

More tonne-miles and lower TCE rates

The pivot to USGC LPG from China, and other importers, will likely see carriers divert more very large gas carriers to the US Gulf Coast. This is a move that LPG carrier BW LPG sees “affecting US Gulf rates negatively” according to its 4Q25 earnings release yesterday.

"Over the longer term, however, vessels that have traditionally loaded in the Middle East are likely to seek cargoes from the US, which could place downward pressure on the rate structure for US loading VLGCs," BW LPG chief executive Kristian Sørensen said in yesterday's earnings call.

BW LPG also said that it has three vessels from its Indian flagged fleet in the region. Two of which are on time charter hires and one in drydock. The vessels on time charter hires are idling outside the Arabian Gulf, assessing the situation on the SOH.

Sørensen views tight supplies being a key concern for Asia Pacific. He added: "The US does not have enough production and exports capacity to meet the shortfall of the Middle Eastern exports, and we’ll probably see a rather serious situation unfolding in the consuming markets in Asia unless the exports of hydrocarbons from the Middle East resume rather soon."

Drewry added that the near-term (one week) impact on rates would be a boost in US-Japan freight rates and a crash in MEG-Japan rates. But its view in a month is that US-Japan freight rates will stabilise as fleets reposition while MEG-Japan rates continue to decline.

The increase in tonne-mile demand should see higher fleet utilisation for carriers, albeit at lower rates, as VLGCs sail longer distances to transport LPG.

Inefficiencies in voyages will also lend further support for tonne-mile demand. BW LPG expects congestions at the Panama Canal to continue as neo-panamax locks are at full capacity.

This will push vessels to continue using the Cape of Good Hope as shipping avoids the Suez Canal and the Red Sea with the increased turmoil.

LPG carriers will also find challenges in negotiating higher rates with charterers as cargo prices are expected to rise on tight supplies. Competition for US cargoes will be stiff, with Europe also in the mix to import USGC LPG.

In Asia, China will also face stiff competition from India. Argus on March 3 reported that “India may only have up to 10 days of LPG stocks to cover demand, and the country is scrambling for cargoes outside of the MEG as the Iran-US conflict has effectively dried up exports from the region”.

The limited stockpile was attributed to its growing population and limited terminal capacity for storage.

The US would be a good alternative for India after it signed an agreement last December to import around 2m tonnes of US LPG this year.

Vortexa analyst Anna Zhminko sees Indian buyers having to “to offer premium terms to secure cargoes from USGC to compete with other Asian buyers — including Northeast [petrochemical markets] or other residential markets like Indonesia.” This would put more downward pressure on freight rates from the US.