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LPG market report transcript
LPG Global Market Outlook
The global production of LPG is expected to increase by 1–3 percent in 2022, to reach around 334 million tons
The increase in demand for LPG’s substitute naphtha for the industrial sector application can keep the production growth rate to a minimum level
The restored commercial and transport activities after the lifting of lockdown impositions will help in the demand of LPG compared to previous year
Impact of COVID-19 on LPG Industry
The LPG category has recovered from a significant impact, as industrial demand has recovered. The expected winter demand, increasing gas usage for heating applications, also acts as a relief for the sector.
The oil & gas companies have faced problems, due to supply chain disruption, with travel impositions and reduced industrial output globally, due to the lockdown effect.
The demand for LPG has reduced in 2020 and partly in 2021, amid COVID-19 pandemic
The reduced demand is mainly due to the less industrial activities, amid COVID-19, due to the lockdown impositions that came in to force to restrict the spread of virus
Porter’s Five Forces Analysis on LPG Industry
Supplier Base: The oil & gas industry has a considerable supplier base, ranging from private companies to state run national oil companies
The vertical integration of oil & gas companies is similar to that of its major competitors. This makes the bargaining power of supplier to be medium
Barriers to New Entrants
Capital-intensive Industry: The oil & gas industry requires huge capitals for building its infrastructure, which includes pipelines, machinery, drilling wells, acquiring land, etc.
Considering the cost of market entry, the barriers to new entry is high
Intensity of Rivalry
Consolidated market : The oil & gas sector is dominated by vertical integration companies that produce a number of low differentiated products, like LPG, petrol, etc.
The key competitors are also established well with significant client base. This coupled with threat of new entrants to be low, makes the intensity of rivalry to be high
Threat of Substitutes
Feedstock for petrochemical sector: Propane and naphtha are used to crack by petrochemical companies to produce Ethylene. The companies tend to lean towards naphtha, as it also produces other products, like propylene, benzene, etc.
When the propane-naphtha spread dips below -$60/ton, it is more economical for the industry to crack Propane, which makes threat of substitute to be medium
Similar products: The products offered by the oil & gas companies are similar to that of those supplied by their competitors. This enables buyers to choose companies selling the products with lower prices or better terms
On a flip side, due to the presence of huge number of buyers, the supplier’s operations would not be impacted greatly if buyers opt for the competitor. Hence, it can be treated as medium
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