Propane Market Pulse Special Edition
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Special Edition Volume: X
Propane Market Pulse
Tools for The impact of changing LPG infrastructure
adapting to a
changing world
by Adam DeLawyer,
vice president, CHS
Propane
As the world around us continues to evolve, the
one thing that seems constant is change. The
world of propane is no exception. As you will
read in this issue’s feature article, changes are
literally reshaping the industry. Although current
propane production is not at the record levels it
was pre-Covid, it is rising and moving closer to
those levels again.
However, exports are also on the rise, thanks to If 2019 was the year of domestic through access to the export channels.
increased capacity. Roughly two-thirds of U.S. propane production growth, 2020 was
Midwest builds out.
propane production is now being exported. This the year of increasing propane
could mean less product sitting in storage origination for exports. Suppliers stepped in to make significant
without a supply commitment, which will make investments and build two new pipelines
Changing U.S. infrastructure has
supply even tighter in the future and could lead with a combined unfractionated natural
enabled previous landlocked propane
to allocations or logistical challenges more gas capacity of 620,000 bpd. The
supply to find a way to the Gulf Coast
quickly than in the past. Arbuckle II pipeline in operation since
and beyond. Several dynamic changes
Q1 2020, will see capacity expand from
So how do we better perform in this new world? in U.S. production in the past two years,
400,000-bpd – to 500,000 bpd by Q2
We believe it all comes down to planning. have led to a recent production
2021. This will take supply from North
Retailers and wholesalers that have the best milestone. In late December 2019, the
Dakota, Montana, Wyoming, Colorado,
supply plan in place will be the most successful. U.S. achieved a record 2.46 million
and Kansas producers and re-route
This plan is no longer just a one-time discussion, barrels per day (bpd) of propane
what was once Conway fractionation
but an ongoing one that includes making production. In Feb 2021, after a COVID
focused supply into the greater Mt.
monthly nominations in an effort to best meet pandemic impacted 2020, we are now
Belvieu region. The Bluestem Pipeline,
your changing needs. Lack of planning can lead back at over 2.40 million bpd of
which came online in Q1 2021 with a
to financial consequences and lost volume at production.
capacity of 120,000 bpd, will originate
supply points in the future, since the producer
Key infrastructure changes include: in Kansas and connect into the Grand
has other places to send that product.
Prix Pipeline in Oklahoma to move
Export capacity increases.
This is why we have designed the Propane additional Conway barrels south to Mt.
Control Room with a best-in-class Supply Only three months after setting that Belvieu.
Planning tool we think will be crucial in this new propane production record, the U.S.
The impact of this growth is an
world. In this issue you will read how one logged an all-time high weekly LPG
increased price correlation between the
marketer is addressing supply planning and export reading of 1.74 million bpd. We
two hubs. As of the end of February,
nominations by teaming up with their account are now in a market that can quite easily
Conway propane has traded at an
manager. export over 70% of the propane
average premium of 2.56 cents to Mt.
produced daily. This reduces reliance on
Later this month you will have an opportunity to Belvieu this winter. The 2020 average
domestic demand, and created a new
attend our Propane session at the CHS Energy discount was 2.0 cents. For a quick
marketing opportunity for U.S.
Roadshow and hear from a team of experts how comparison, Conway’s discount in 2019
producers. Suppliers based in the
these changes will continue to affect all of us. I averaged six cents and was as much as
Midwest were left out initially but now
encourage you to take advantage of these a 20-cent discount in the second half of
the inter-regional pipeline growth
opportunities to help prepare your business for 2018.
projects have provided a solution
success as we navigate this changing world.
The information contained in this letter is the best information we have at hand on the subjects discussed, and is taken from sources we believe to be
reliable, but is not guaranteed by us as to the accuracy or completeness and is sent to you for informational purposes only. Any prices indicated are subject
to change with market conditions. © 2021 CHS Inc.
Special Edition Volume: X
Propane Market Pulse
IMPORTANT TIPS TO SHARE WITH RENTERS
The impact of changing the winter and now trading at a large industry experts on how the impact of
premium to Mt. Belvieu with the arrival of propane becoming a global commodity
LPG infrastructure cold weather in February. Warmer may be changing domestic industry
(continue) conditions have helped keep Midwest behavior. Discover how to prepare for the
demand in check, with plenty of supply uncertainty of next year’s heating season
There are still many unknowns as we
for most of the season. We have and what is driving the changing
navigate this new era of inter-regional
experienced the shift to wet premiums as fundamentals. Panelists include Ben
pipeline infrastructure, but Conway’s hub
inventories declined in January and Lyden, director of trading and risk; Tyler
price will likely more closely follow that
February due to the large export Kelly, director of supply; Alan Groene,
of Mt. Belvieu and global markets.
program and a shift in this overall senior account manager; and moderator
Waiting for depressed prices at Midwest demand profile for 2021 and beyond. Dennis St. Aubin, director of sales West
pipeline terminals due to unseasonably Region.
Learn More at Upcoming Propane
warm weather could be a thing of the
Session To register for the CHS Virtual Roadshow
past, as this winter illustrated. We are
visit: https://www.chspropaneinsights.
already seeing this play out today, with Click HERE to register for the Virtual
com/2021-spring-roadshow/
the narrow discount in Conway most of Roadshow and hear from a panel of
Keys to reducing risk in choice of buying mechanisms to help Brandt as a partnership. “We’ve worked
control price, and dependability, with together a long time and there’s
propane supply planning regular tank safety inspections.” transparency between us. I understand
A good propane supply plan is an the narrow margins he often works with,
Eric Brandt, CHS Propane account
indispensable tool for Steve Haines, and the risk he takes if he’s not able to
manager who has worked with him for
who’s in charge of southern region move product he’s committed to buying.”
more than 15 years, attributes the
petroleum and propane purchasing and
cooperative’s success in propane to Haines also depends on Brandt for
supply for Sunrise Cooperative in Ohio. It
Haines’ management approach. “Two of market intelligence and industry insights.
Steve’s strengths are that he regularly “That helps me maintain a big-picture
communicates with me and he really uses view of broader events that could be
his supply plan,” says Brandt. “The shaping our industry.”
original plan that he develops every April
One example he points to is
is a baseline to work from, but it’s a living
infrastructure changes within the United
document that he routinely updates. We
States that will more easily allow for the
communicate frequently to do that.
export of propane, which could put more
“Steve also understands that supply pressure on suppliers. “That’s why when
commitments need to be a two-way it comes to making changes to our
has helped him confidently supply street, and our buying is based on what supply plan, I try to treat our suppliers
cooperative customers as their business our customers say they need,” he adds. with the same consideration I’d like our
has grown from covering just two “Suppliers are better able to perform for customers to show us.”
counties when he started there 25 years their customers when there is regular
ago to the current 30-county trade area. communication between the two.”
“We’ve gotten here by putting emphasis Haines says there are several keys to
on delivering value,” he says. “If a reducing propane supply risk:
customer is just looking to save a few
pennies, we don’t chase after the Work with dependable suppliers.
business. Our core customers understand For Haines, this tops the list. He says he
they get more than just propane from us. regularly works with three to four
They get reliability, service when they suppliers, but views his relationship with
need it through our auto-fill program, a
The information contained in this letter is the best information we have at hand on the subjects discussed, and is taken from sources we believe to be
reliable, but is not guaranteed by us as to the accuracy or completeness and is sent to you for informational purposes only. Any prices indicated aresubject
to change with market conditions. © 2021 CHS Inc.
Special Edition Volume: X
Propane Market Pulse
IMPORTANT TIPS TO SHARE WITH RENTERS
Keys to reducing risk in Invest in consumer tank monitors. Stick to your plan.
propane supply planning Having no major supplies issues in recent At times it takes discipline to follow the
(continue) years is something Haines attributes, in plan and not chase after lower prices in
large part, to the cooperative investing in the summer, or from a less reliable
Use dependable terminals. consumer tank monitors. “They take a lot source, adds Haines. “It’s not always
of the guesswork out of managing about getting the absolute lowest price
Your suppliers are a good source of
supply.” but having a reliable supply for your
information here and can help you
customers. That’s how you deliver value.”
determine which terminals are moving Include transportation.
greater volumes and are generally more Propane marketers should work with
reliable, he says. “It shouldn’t be just There can be plenty of gas at a terminal
their CHS account managers to discuss
about price.” but it won’t do you any good if you can’t
how supply planning may help you be
get it transported to the plant, he notes.
more prepared for next winter. Marketers
Consider adding storage. “For that reason we sometimes buy
not currently partnering with CHS
higher-priced gas in the winter because
One of the best ways to reduce supply propane can learn more by visiting CHS
it’s closer.” Maintaining good
risk is to have more on-site storage. Propane Insights or by calling 1-800-852-
relationships with carriers is important,
Haines says Sunrise Cooperative has 8184.
and so is including that factor in your
more than doubled its propane storage
supply planning process.
since 2014.
Register Now for the 2021 CHS Energy Virtual Roadshow
Registration is now open for the virtual, CHS Energy
Roadshow. The roadshow will be taking place Monday,
March 15th – March 18th . Topics include Hedging, Propane,
Propane Powered, Transportation, Lubricants, AquaFighter,
GPI, Refined Fuels, Propane Safety and Energy Equipment.
Each 45-minute sessions will include a presentation as well
as a live Q&A.
To register for the CHS Virtual Roadshow
visit: https://www.chspropaneinsights.
com/2021-spring-roadshow/
Consumers see value in the Cenex Propane Brand
Throughout the year, CHS is working the page seeking a Cenex Propane dealer
to educate consumers on the value of or information on propane. They find
propane and the Cenex brand through stories about propane-powered homes,
our Cenexpert blogs. Content for the RVs, school buses and lawnmowers,
blog is often based on analytics that backyard uses and important safety tips.
identify propane topics of most interest To view the latest Cenexpert blog
to consumers. https://www.cenex.com/about/cenex-
These efforts are producing success. information/cenexperts-blog-page/
Each month an average of 10,000 propane
readers click on the residential propane
page on Cenex.com. Consumers come to
The information contained in this letter is the best information we have at hand on the subjects discussed, and is taken from sources we believe to be
reliable, but is not guaranteed by us as to the accuracy or completeness and is sent to you for informational purposes only. Any prices indicated aresubject
to change with market conditions. © 2021 CHS Inc.
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