LPG imports fall 25%, pushing cylinder prices above Tk2,000

A sharp decline in liquefied petroleum gas (LPG) imports in September has tightened supplies, pushing the retail price of the widely used 12-kg cylinder more than Tk400-Tk500 above the regulator-fixed rate.

LPG importers and Bangladesh Energy Regulatory Commission (BERC) sources said the country imported around 160,000 tonnes of LPG in August, while imports so far this month have fallen to about 120,000 tonnes, a 25% decline.

The supply squeeze has pushed the retail price of a 12-kg cylinder above Tk2,000 in recent days, against the BERC-fixed price of Tk1,585 for September.

Industry insiders attributed the shortage mainly to disruptions along key shipping routes, a vessel shortage and sharply higher freight costs amid the ongoing conflict and attacks in the Middle East.

Supply routes disrupted

The closure and disruption of the Strait of Hormuz and the Red Sea route have severely affected LPG shipments from the Middle East, Bangladesh's main sourcing region. Importers are increasingly dependent on longer, costlier routes, while higher international LPG prices have further raised import costs.

"The main problem is cargo availability. Cargo is simply not available," said Abu Sayed Raza, chief marketing officer of Meghna Fresh LPG Ltd.

"Previously, while one route might have been restricted, at least one remained open; now, both routes are blocked – the Red Sea route and the Strait of Hormuz route," he said, adding that only small and irregular quantities were arriving through alternative routes, including Oman, Malaysia and Norway.

Importers said suppliers under term contracts were also unable to provide their full contracted volumes. Raza said traders had informed his company they could not supply 20% of the agreed monthly volume.

"Under the BERC pricing mechanism, the premium was set at $160 last month. We are ready and willing to pay a premium of $250 to $300 to secure the product, yet we still cannot obtain the cargo," he said.

Tanzeem Chowdhury, CEO of Omera Petroleum Limited, said the company imported around 30,000 tonnes of LPG in September. "Supply uncertainty from the producers' end has created a disruption, but we are trying our best to keep the market sufficiently supplied," he said.

Members of the LPG Operators Association of Bangladesh (LOAB) said some importers were receiving 30%-40% less than their contracted volumes, while spot-market availability had also fallen sharply.

They said the BERC pricing mechanism had previously factored in an import premium of around $160 per tonne, while traders now faced premiums of 260-400. Some companies have therefore reduced or halted imports rather than incur losses on cargoes whose higher costs cannot be reflected in the regulated retail price.

Consumers bear the brunt

Consumers are now paying the cost of the supply disruption. Although BERC cut the official price of a 12-kg cylinder by Tk13 to Tk1,585 on 2 September, consumers in many areas are paying Tk500-Tk600 more, taking the price above Tk2,000.

BERC Chairman Jalal Ahmed told The Business Standard that the September market was experiencing a supply shortage after some companies failed to receive scheduled imports. "We will hold talks with LPG importers to keep the supply normal," he said.

Bangladesh has annual LPG demand of around 1.5-1.6 million tonnes, with nearly 10 million consumers relying on the fuel. Household cooking accounts for about 80% of consumption. Private companies supply around 99% of the market, while state-owned firms account for about 1%.

The country faced a similar crisis in December last year after private-sector imports fell sharply. The government subsequently authorised Bangladesh Petroleum Corporation (BPC) to import LPG directly.

However, efforts to secure suppliers were unsuccessful except for Speed Marketing, which was awarded a contract through direct procurement to supply 5,000 tonnes. The cargo's arrival date remains uncertain.

Jalal Ahmed warned that the LPG market could deteriorate further in October if sufficient cargoes are not secured, as international supplies remain tight amid shipping disruptions.