Hormuz Crisis Rewrites Global LPG Trade Dynamics

The Strait of Hormuz crisis has disrupted global supply chains, particularly in the liquefied petroleum gas (LPG) market. The US leads LPG exports by a wide margin, but Middle East countries like Saudi Arabia, UAE, and Qatar are critical suppliers that have been cut off due to the closure.

The traditional LPG supply chain is under pressure from rising US exports and mounting geopolitical turmoil. Propane prices in Texas rose nearly 10% in early March, reaching new highs as supply tightened. By mid-June, traffic through Hormuz had plummeted to an average of 11 vessels per day, driving the cost of propane up by about 25%.

The crisis has exposed the vulnerability of overreliance on a single choke point and emphasized the importance of agile private traders who can find alternative routes. The US's emergence as the world's leading LPG supplier is clear, with analysts projecting steady expansion in the market. Propane volumes are expected to reach 260 million mt by 2031.

Private commodity traders like BGN Group and Petredec are crucial in keeping supply chains stable during times of conflict and disruption. They operate globally, manage large fleets, and have been taking advantage of lower risk and insurance costs associated with US export flows.