2016, the troubles in LPG trading

Thread Content

This post was last edited by yinkuilin6868 on 2016-6-15 08:42. Recently, customers have frequently asked, \"How is the business in liquefied gas? Is it easy to do?\" How are the profits? ”There are also many customers who, armed with the purchasing targets set by the manufacturers, are asking where they can find suitable suppliers in order to get involved in liquefied gas trading. Is the trade situation so good this year? Are there that many market opportunities? I. Reduced conditions for resource circulation; road transport is declining. After 2013, following CNPC’s takeover of the sales of liquefied gas resources, Sinopec also began to consolidate resources from various regions for unified sales. In the first year, the effects of centralized distribution became evident; since 2013, the domestic liquefied gas market has shown no more of the previous patterns in terms of price differences between peak and off-peak periods, as well as between the north and south. Those days when prices kept rising as demand increased are gone forever, which has made large-scale movements of consumers from the north to the south in the civilian gas market less common. Furthermore, with the rapid growth of advanced processing in various regions, local raw gas resources have gradually begun to be utilized within those regions themselves, and the arbitrage trades that once involved distances of thousands of kilometers are slowly declining. According to the statistics from Jin Yin Dao, at present, only the Ningxia region has a processing capacity for C4 compounds after etherification of over 3,000 tons per day; Inner Mongolia and Shanxi have a daily demand of 800 tons each. The Shaanxi-Gansu-Ningxia region has become another major area for such advanced processing, following Shandong. Not only were local resources utilized, but the raw gas flowing south from the Xinjiang region was also intercepted. Having lost the advantages in terms of price and volume of resources, long-distance trade activities have become increasingly rare; many traders have begun to withdraw from such long-distance trading, with those that remain being mainly companies that own their own shipping fleets. II. Increased market transparency and greater de-tradeization. In a previous conversation, a trader said, “It’s getting harder and harder to do business in trade; the profit margins are very small. It’s less hassleful to engage in transportation work these days; we would prefer to do that instead.” ”Another trader shared the same view: “Doing business in trade is especially difficult this year; the situation is even worse than in 2015. It’s hard to make even 10 or 20 yuan per ton these days. This year, the only goal is to keep the trucks running, and it’s already good enough if we can earn just the cost of transportation.” ”I believe many people share this feeling: the market is becoming increasingly difficult to operate in from year to year, and as it develops further, it becomes more challenging for traders to survive. With the increasing development of networks and telecommunications, there is greater diversity in the channels available for gathering information. Market prices can be obtained by making a few phone calls, and the profits that traders might earn are already clearly calculated by those who purchase the goods. If traders want to squeeze out more profit, they can only do so by cutting costs on shipping. Of course, if there are customers who pay quickly, a small amount of profit remains; but when payment is delayed or occurs on weekends or holidays, and after deducting the financing costs, almost all of that meager profit goes to the bank. Putting aside the trade prices themselves, more and more purchasing methods now involve direct transactions between manufacturers, with traders having no chance to get involved. Especially in major companies such as Sinopec and CNPC, one of the basic requirements for establishing a business entity is that it must be a manufacturing enterprise; it is even more difficult for trading enterprises to do so. More and more refineries are establishing projects for the advanced processing of gas. If these projects proceed smoothly, and the industrial chain is expanded further, market supply will decrease even more. How much of this market will be left for traders? Today, not only is there a need to reduce capacity in the overcapacity manufacturing sector, but a similar process of \"capacity reduction\" is also taking place in the trade industry. The trade industry has its own reasons for existing and its advantages, yet it too needs reform, which is an essential part of its healthy development. Given the current state of the market, the industry is still in a period of restructuring; without advantages in terms of resources and capacity, entering the market rashly may not be the best choice. One final reminder: the industry involves risks, so one should approach it with caution.