South Korea’s LPG imports are expected to increase 9.5% in 2019 on account of stronger demand from the petrochemical sector as well as the recent policy change that will allow LPG-fueled vehicles in the private sector.
South Korea’s LPG market was starting to look saturated with low demand, but as the government is reconsidering cleaner fuels, its demand is likely to shoot up. Severe air pollution in the country caused mainly by vehicular emissions has forced the government to rethink its earlier strategy.
Until February 2019 only commercial vehicles such as taxis, rental cars, vans and small buses in the country were allowed to use LPG as auto fuel. But from end-March, the government has permitted anyone in the country to buy LPG-powered vehicles, or to modify their cars to run on LPG as part of its efforts to improve air quality. The move makes sense, as LPG vehicles emit less fine dust compared with conventional gas or diesel-fueled cars.
In 2016, South Korea had close to 2.0 million LPG-powered vehicles which consumed 3.5 million tonnes of LPG, but the figure declined in 2017 and 2018 owing to the lack of initiatives. However, with restrictions lifted, we expect the number of LPG-fueled vehicles to increase, raising LPG consumption in the transportation sector. Furthermore, LPG used as an auto fuel is 42% cheaper than diesel or gasoline.
LPG consumption in the transportation sector in 2018 is estimated at a lower 46% over 2017, but we expect the figure to rise to 51% in 2019 due to the new policy. The autogas policy follows a tax cut on LPG and LNG imports in November 2018 indicating the push that the cleaner fuels have been receiving in the country.
Increase in autogas consumption along with LPG tax cuts will boost imports of gas in South Korea, which are expected to rise from6.4 million tonnes in 2018 to 7.0 million tonnes in 2019, a rise of 9.5%.
In 2018, South Korea imported 4.8 million tonnes of propane and 1.6 million tonnes of butane which translates to a 75:25 ratio. Increasing use of LPG in the transportation sector will re-balance the ratio in favour of butane, which is a major component of autogas in the country.
In light of the US sanctions on Iran and OPEC production cuts, South Korea will be looking to increase its LPG imports from the US, which is already its largest LPG supplier. While South Korea imported 4.9 million tonnes of LPG from the US in 2018, rising autogas consumption will increase the share of US LPG in the South Korean market which will be favourable for the shipping tonne-mile demand.
Huge Opportunities For Investment in Maritime Sector: Nitin Gadkari
India Tanker Shipping & Trade Summit 2019