New data indicates that global demand for U.S. propane exports won’t be going away any time soon.
A report from the U.S. Energy Information Administration finds that U.S. propane exports reached a new monthly record in December 2023. According to the EIA, U.S. propane exports to Asia in 2023 grew by roughly 25% compared to 2022. China in particular accounted for much of the growth, with U.S. propane exports to the country rising nearly 50% in 2023.
The report notes other macroeconomic factors in play that helped to drive demand for U.S. exports. Namely, Saudi Arabia has lowered propane exports due to reductions in crude oil production, leaving countries in need of an alternate supply. Europe’s continued reduction of Russian propane exports also leaves room for increased imports from the United States. Per the report, propane exports from the United States to Europe increased by about 20% from 2022 to 2023.
Propane’s role as a petrochemical is a key driver behind growing demand for U.S. exports. Petrochemicals produced from propane are utilized in the manufacturing of a number of plastic and synthetic products. The EIA report notes that increased usage of propane-based petrochemicals in East Asia are a principal motivator for rising U.S. propane exports.
See More: Propane Helps Fuel Midstream/MLP Growth
Investing in Propane
Midstream/MLP companies can provide investors a vehicle to potentially profit off burgeoning propane demand. The Alerian MLP ETF (NYSE Arca: AMLP) gives exposure to a number of infrastructure assets key to global exports, including pipelines, processing plants, and storage.
The fund tracks the performance of the Alerian MLP Infrastructure Index (AMZI). AMZI has shown notable strength in the last year, with a dividend yield of 7.0% as of 3/19. Index constituents have largely been growing their dividends.
See More: 4Q23 Midstream/MLP Dividend Recap: The Growth Continues
AMLP is currently up 39.01% over the last 12 months. The fund possesses over $8.2 billion in assets under management and has seen over $470 million in flows over the last 12 months.
AMZI is the underlying index for the Alerian MLP ETF (AMLP) and the ETRACS Alerian MLP Infrastructure Index ETN Series B (MLPB).
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