Domestic liquefied petroleum gas (LPG) companies raised gas supply prices by 30 won per kilogram this month. The industry expects LPG prices to rise further after the local elections on the 3rd.
According to the LPG industry on the 2nd, E1 said it would raise June household and commercial propane gas prices to 1,433.17 won per kg and industrial propane gas prices to 1,439.77 won, up 30 won from the previous month. The butane gas price was also set at 1,738.05 won per kg (1,015.02 won per liter), up 30 won from the previous month.
SK Gas also raised this month's propane price to 1,435.73 won per kg and the butane price to 1,740.05 won, up 30 won each.
An E1 official said, "We slightly raised the LPG supply price last month, but there are still many upward factors that need to be reflected in prices," adding, "To follow the government's price stabilization stance and reduce the burden on consumers, we kept the increase as small as possible when setting prices."
Domestic LPG prices have been on the rise for four consecutive months since March. The won has weakened against the dollar, and freight and insurance for LPG carriers have surged due to the blockade of the Strait of Hormuz caused by the war between the United States and Iran.
Domestic LPG prices are set based on the international LPG price (CP, Contact Price) announced at the end of each month by Aramco, the state-run oil company of Saudi Arabia. The May CP affecting June domestic LPG prices is $750 per ton for propane and $800 for butane, the same as the previous month. On top of that, SK Gas and E1 determine final supply prices by factoring in the won-dollar exchange rate, transportation, insurance, taxes, and domestic price conditions.
Despite this increase, the industry assesses that upward pressure equivalent to more than 300 won per kg remains. Unreflected upward factors translate into losses for importers. In fact, SK Gas and E1 posted losses on domestic sales in the first quarter of this year.
Some analysts say that ahead of the June 3 local elections, companies likely found it difficult to fully reflect upward factors in LPG prices. LPG is mainly used by low-income households, residents in areas excluded from city gas (LNG) infrastructure, small self-employed business owners, and taxi drivers. For that reason, mindful of the gaze of the government or political circles, which feared an impact on the elections, companies were reluctant to move ahead with price hikes.
Accordingly, many expect domestic LPG prices to rise steeply starting in July, after the June 3 local elections end. Summer is the off-season with low demand for heating LPG, so total LPG consumption is relatively small. Even if prices rise, the impact on overall consumer prices is limited, leading the industry to believe importers may raise prices by a large margin.