China’s US LPG buying is back on a better duty strategy

China's imports of US liquefied petroleum gas (LPG) have rebounded to pre-2025 trade war levels, aided by a lack of Middle Eastern supply and buyers adopting an improved customs duty strategy. In July 2026, US LPG shipments to China stood at approximately 630,000 barrels, while in August 2026, this figure rose to around 530,000 barrels.

July's import volume surpassed the July 2023 average of 560,000 barrels, and August's exceeded both August 2023 and August 2024 levels, marking a seasonal high for the month. Despite September imports forecasted to decline to approximately 410,000 barrels due to rerouting through the Cape of Good Hope, Chinese arrivals have surpassed a five-year seasonal average amid the Hormuz conflict and lingering effects of the US-China trade war, which pushed monthly imports to a five-year low in June 2025.

North America's share of China's seaborne LPG imports has surged from under 20% in mid-2025 to over 70% by May 2026, following a supply shortfall from the Middle East. This shift is driven by supply constraints in the Middle East, exacerbated by conflicts in the Strait of Hormuz and Bab al-Mandeb, along with an intensifying El Niño climate phenomenon.

Far East buyers have increasingly sought US Gulf Coast supplies, resulting in higher spot cargo demand and canal restrictions, which have increased transit costs through Panama. Consequently, more vessels are opting for the longer Cape of Good Hope route to circumvent Panama transit costs. These arrivals provide insights into China's domestic LPG balance, though they are less indicative of when the purchases occurred, as voyage length is influenced by Panama transit costs.

While arrivals reflect the barrels physically available to refineries and retailers, they are not reliable indicators of when the buying took place due to the impact of Panama transit costs. For example, cargoes bought in the same week may arrive up to two weeks apart depending on the chosen route. Vortexa's voyage calculator indicates that VLGC vessels traveling between Houston and Ningbo via Panama take about 29 days, compared to 44 days via the Cape of Good Hope, a 15-day difference.

Cargoes acquired in the same week can reach Chinese ports up to two weeks apart, contingent on the chosen routing.

To offset China's 11% duty on US propane (1% provisional rate plus a 10% retaliatory tariff), importers can employ two strategies: bonded storage and processing trade. A bonded storage declaration suspends duties while the cargo is under customs supervision, offering a duty deferral option and a choice between domestic resale or re-export without immediate payment.

The processing trade, on the other hand, removes duties rather than postponing them; imported propane feedstock is fully bonded upon entry and written off against the finished product (usually propylene or PP derived from PDH units). Once the processed product leaves China, the duty relief becomes permanent. Importers can still sell the finished polymer domestically, paying the duty and import VAT if downstream margins abroad worsen.

Importers have the flexibility to choose between the two regimes based on their downstream market conditions, with exemptions as the default option, and domestic sale as a costed exit strategy.