China turns to Iran for LPG, ignoring sanctions

Ship-tracking data appears to show that some Chinese buyers are continuing to use Iran as a source of liquefied petroleum gas, despite being hit by the trade war and US sanctions on the Persian Gulf nation.

China sourced around a fifth of its LPG – used as cooking fuel, in cigarette lighters and to make plastic – from the United States before Beijing slapped a 25 per cent tariff on the gas in August as the trade tussle heated up. Buyers then turned to Iran, which accounted for around a third of imports in April, before US President Donald Trump blocked all energy exports from the country in May.

But some Chinese customers are still buying from Iran, according to Paris-based energy researcher Kpler SAS, which used ship-tracking data to estimate at least four supertankers loaded Iranian LPG in May and June that was destined for China. That would equate to around US$80 million of the gas, according to Bloomberg calculations.

“They’ve started using a variety of techniques to hide their activity,” Ilya Niklyaev, an LPG analyst at Kpler, said. “Like switching off transponders as well as intentionally signalling wrong destinations and indicating loading ports in Qatar, Saudi Arabia or the UAE.”

The predicament of the Chinese buyers underscores how the White House’s aggressive trade and foreign policy is disrupting global commodity flows. To avoid running afoul of US sanctions, LPG importers in Asia’s largest economy would have to turn to more expensive supplies from elsewhere in the Middle East or Africa.