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Algeria-Morocco dispute hits LPG trade flows

January 14, 2022

A diplomatic breakdown between Algeria and Morocco has led to disruption of traditional LPG trading flows, with Morocco looking west to secure product and Algeria looking east.

Morocco is one of the largest consumers of butane in the Mediterranean region, where it is widely used for domestic heating and cooking. Neighbouring Algeria is a key supplier to the region.

Algeria shipped LPG to Morocco up until the end of 2021 to fulfil agreed contractual obligations, but it is uncertain if contracts will be renewed in 2022. The dispute, which has its roots in the 1970s, escalated in August last year and has affected movement of Algerian gas to Europe.

Customs data show Morocco took delivery of 1.03mn t of Algerian LPG last year, largely steady from 2020 and 17pc higher than in 2019. This figure was 2.0mn t in 2015. The most recent Algerian shipment to Morocco arrived on 16 December, on the Gaschem Weser. Algeria exported 266,000t of LPG in the first 13 days of this month, none of which was aimed at Morocco; in the same period in 2021, 6,800t, or 3.5pc of Algerian exports, went to Morocco, according to Vortexa data.

A move by Algeria to stop issuing a key customs form has led Morocco to impose an extra $20/t tax on imports from its neighbour, which appears to be deterring spot deals.

Some of the Algerian LPG displaced from Morocco are likely to find a home in Asia-Pacific. So far this year Algeria has sent 40,000t to Sri Lanka, or 20pc of its total exports. Morocco is likely to diversify its imports. Spain, the UK and Norway shipped a combined 11,000t to Morocco in the first 13 days of January, according to Vortexa.

The US is now Morocco's largest supplier of LPG. Customs figures show 2.19mn t of Morocco's imported LPG originated in the US last year, equal to 46pc of the total, compared with only 700t, or 15pc, in 2015. The US EIA has said exports to Morocco were 1mn t in the first 10 months of 2021, compared with 245,000t in the same period in 2015.