LPG witnesses market glut but price finds little fall

Bangladesh's LPG market is now filled to the brim with a good number of foreign big players also putting their stakes on the business bonanza, but the glut has left little impact on the price pyramid.
A market survey shows the price indices at retail level almost same as few months before.
Even, a sharp fall in the global energy prices since last June could do little to influence the LPG domestic market to give the users some share of the fuel dividends.
However, top executives at the leading liquefied petroleum gas (LPG) players told the FE that there was a price war now with the supply surpassing the demand.
Currently, the annual demand for LPG is around 120,000 tonnes in the country, with a growth of nearly 12 per cent on average, according to the current market players.
Even few months back, the demand-supply scales were fairly on a par.
But after commercial operation of Omera, a subsidiary of MJL Lubricant, the supply side-with about 400,000 tonnes as of now-far outstrips the demand.
The quantity will come to some 500,000 tonnes a year after commercial operation of BM Energy.
BM Energy, a Bangladesh-Netherlands joint venture, is set to go into commercial production on May 30 and will add another 80,000 tonnes to the total.
"We're expecting to go into commercial production on May 30 next," Mustafizur Rahman, managing director of the BM Energy, told the FE Wednesday.
The local private plants import ready-to-use LPG from the Middle-Eastern countries and it is believed that they manage the market as per demand and supply.
But, the state-run BPC's LPG supply is 20,000 tonnes, one-sixth of the total present demand, which in no way can intervene in the market.
Rather, the dealers of the state-owned subsidiaries make a windfall profit following a gap between the BPC and the private ones.
When contacted, a number of senior executives in the fuel field told the FE that prices were already on a downturn following the supply glut.
They argued that the price of 12-kilogramme bottled LPG now stands nearly at Tk 1,500 against Tk 1,700 a year back.
On the other hand, the subsidiaries of the BPC sell the same for Tk 700.
But, its price also stands at the level of private ones as the petroleum fuel changes several hands to reach the final consumers.
Ishtiaq Ahmed, chief executive officer at Omera, spoke about a "price war" following supply glut.
"At the moment, there is a price war in the industry. This is driven by few factors: mainly supply is more than the demand," he told the FE correspondent.
He pointed out that there are few companies who do not have any LPG-import terminal and they make cylinders locally without maintaining requisite global safety standards.
"As a consequence, the cost of production of these companies is significantly low and can sell at a very low price, which provokes a price war," said the largest- capacity company's top executive.
Mahiudidn Khalid, project manager at the BM Energy, which is supposed to be second-largest one, said the demand for the LPG dropped somewhat as the government has started providing new gas connection.
However, he said they will have uninterrupted supply chain as they have connected their plant with the floating terminal at the Bay of Bengal.
Bashundhara is now rated as the market leader by sales.
The other existing companies are subsidiaries of BPC --- Padma, Meghna and Jamuna-Jamuna Spacetech, French TotalGaz and Australian Kleenheat.
The private suppliers bottle the finished LPG in the local plants.
But, the BPC produces LPG from crude oils and for this reason its prices remained almost half the prices charged by others in the trade.
Jasimharoon@yahoo,com