Propane Market - Forecast(2023 - 2028)

Propane Market Overview

Propane market size is forecast to reach US$90.3 billion by 2027, after growing at a CAGR of 4.3% during 2022-2027. The use of propane for various industrial processes, large-scale applications such as water heaters, and commercial-grade propane-fuelled furnaces, which are utilized in the warehouse, hospitals, and manufacturing facilities, is driving the growth of the propane market. Metal processing industries are also dedicated consumers of propane to fuel their soldering, vulcanizing equipment, and cutting torches, which is anticipated to propel the propane market growth. The propane market is excessively driven by the rapidly rising propane engine fuel, that is liquified petroleum gas market in the forecast period. Moreover, in recent years the growing use of propane as a cooking and grilling fuel, similar to butadiene, butylene, and isobutylene, is driving the market growth of propane. 

COVID-19 Impact

The COVID-19 outbreak widely affected the agriculture, industrial, and transportation industries. Economies of each industry got impacted and resulted in stagnation of activities across the sectors that use propane. Due to the lockdown norms, the manufacturing process of various products in these sectors decreased due to the non-functioning of the production plants. For instance, according to the International Organization of Motor Vehicle Manufacturers, in 2020, motor vehicle production declined by 22% in Europe, and 20% in America. However, once the agriculture and transportation activities get back on track and start functioning fully, by 2022, the propane market is estimated to incline. 

Report Coverage

The report: “Propane Market Report – Forecast (2022 - 2027)”, by IndustryARC, covers an in-depth analysis of the following segments of the propane industry.

By Grade Type: HD-5 Propane, HD-10 Propane, Commercial Propane, and Others.
By Form: Liquid, Vapour, and Others.
By Application: Fuel, Plastics, Heating, Cooking, Refrigeration, Drying, and Others.
By End Use Industry: Residential (Independent homes, Row homes, Large-apartment buildings), Commercial (Hospitals and Healthcare Infrastructure, Educational Institutes, Hotels and Restaurants, Banks and Financial Institutions, Airports, Hyper and Super Market, Shopping-Malls, Others), Industrial (Manufacturing Plants, Industrial Plants, Warehouses, Others), Transportation (Aerospace, Marine, Automotive, Others), Chemical, Agriculture, and Others.
By Geography: North America (U.S.A., Canada, and Mexico), Europe (UK, Germany, France, Italy, Netherlands, Spain, Russia, Belgium, and Rest of Europe), Asia-Pacific (China, Japan, India, South Korea, Australia and New Zealand, Indonesia, Taiwan, Malaysia, and Rest of APAC), South America (Brazil, Argentina, Colombia, Chile, and Rest of South America), Rest of the World (Middle East and Africa).

Key Takeaways

 Figure: Asia-Pacific Propane Market Revenue, 2021-2027 (US$ Billion)

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Propane Market Segment Analysis – By Grade Type

The HD-5 propane segment held the largest share in the propane market in 2021. HD-5 grade propane is known as consumer-grade propane. It is the highest-grade propane available as compared to HD-10 propane, commercial propane, and others. HD-5 means that the propane is suitable to be utilized as an engine fuel. HD-5 specification propane consists of a minimum of 90% propane, a maximum of 5% propylene, and other remainder gases such as isobutane, butane, methane, and others. The highest quality propane means that the propane holds to the specification needs to sell and label as HD-5 propane. Thus, with the growth of the HD-5 propane segment, the market for propane will further rise over the forecast period. 

Propane Market Segment Analysis – By End-Use Industry

The residential segment held the largest share in the propane market in 2021 and is expected to grow at a CAGR of 4.7% during 2022-2027. In the residential sector, propane is utilized for air conditioning, cooking, refrigerating foods, heating water, drying clothes, fueling fireplaces, and lighting. Propane is used generally in houses in rural areas and also in mobile homes, that do not have natural gas service and to meet some of their energy requirements. The growth in the real estate sector owing to the growth in residential units has increased the demand for propane. For instance, according to the government of Canada, in 2021, for the Rapid Housing Initiative to support the urgent housing needs of vulnerable Canadians, the government invested US$1.5 billion, to provide adequate affordable housing. Additionally, a minimum of 4,500 new affordable units was also added to Canada's housing supply. Thus, the increasing investments by the government for housing people will drive the demand for propane during the forecast period. 

Propane Market Segment Analysis – By Geography

The Asia-Pacific region dominated the propane market with a share of 42.1% in the year 2021. The Asia Pacific region is predicted to continue its dominance in the market during the forecast period due to the increasing requirement for propane in developing countries such as China, Japan, India, and South Korea. The residential requirement for propane for household cooking has increased substantially. The Asia Pacific dominates the propane market owing to the rising growth and increasing investments in housing projects. For instance, according to Invest India, in 2021, a total of 91.5 lakh houses were grounded for construction and 53 lakh houses were completed, out of 1.14 Cr sanctioned houses. Additionally, with the increasing levels of pollution, the demand for propane in the Asia Pacific region is notably surging. In China, the auto-gas market has developed primarily to curb pollution, with an initiation of various local programs encouraging the utilization of alternative fuel, which is positively impacting the market growth for propane. Thus, the rising investments in the residential sector and the clean fuel requirement will drive the propane market growth in the forecast period.

Propane Market Drivers

Increasing demand for Propane in Transportation Industry

The mixture of propane and butane is utilized as a fuel in internal combustion engines in automotive and also in generators. The propane market has witnessed the growing demand in recent years, owing to an increase in liquified petroleum gas (LPG) fueled vehicles. Propane is one of a group of LPG, along with the others including propylene, butadiene, butane, butylene, and isobutylene. For the fossil fuels such as gasoline and diesel, propane is increasingly becoming a preferred substitute owing to its low carbon content. The demand for propane is rising as it is excessively available, stable, and cost-effective, as compared to other energy sources. The growing demand for propane as an alternative transportation fuel, due to its affordability, safety, and clean-burning qualities, is nourishing the market growth. Moreover, the accessibility of new light and medium heavy-duty propane vehicles is surging the demand for propane as an alternative fuel. In recent years the rising production of automotive has further raised the demand for propane. For instance, according to Organisation Internationale des Constructeurs d'Automobiles (OICA), in Brazil, motor vehicle production increased from 23,87,967 units in 2018 to 24,48,490 units in the year 2019. Similarly, in Malaysia, the production of motor vehicles increased from 5,20,526 units in 2018 to 5,34,115 units in the year 2019. Additionally, according to the International Trade Administration (ITA), in China, the government anticipates automobile manufacturing to reach 35 million by 2025. Thus, increasing automotive production will require more propane, which will drive the growth of the propane market during the forecast period.

Surging Demand for Propane in the Agriculture Sector

The agriculture sector uses propane for their requirements such as irrigation pumps, generators, dryers, and any agricultural equipment that can be run on oil, can utilize propane. Propane is a good fuel source for all types of agricultural vehicles such as lawnmowers, forklifts, tractors, delivery trucks, and others. Propane costs less to operate per mile, requires less vehicle servicing, and burns cleaner. The increasing growth in the agriculture industry is driving the market for propane. For instance, according to the Indian Brand Equity Foundation (IBEF), by 2022, India is expected to have achieved the lofty goal of doubling farm income. Increased investment in agricultural infrastructure, such as irrigation facilities, warehousing, and cold storage, is expected to boost India's agriculture sector in the upcoming years. Thus, with the growth of the agriculture industry, the propane market will further rise over the forecast period.

Propane Market Challenges

The Propane being a Depleting Fossil Fuel Will Hamper the Market Growth

Propane is a clean-burning fossil fuel, thus, availability is the main concern in the propane market. It is largely extracted and recovered from the depleting levels of non-renewable natural reservoirs. The supply and availability of propane are interrelated to the supply and availability of petroleum; therefore, it cannot be utilized as a substitute when there is a paucity in petroleum. Since, propane is depleting the price for propane is also increasing further due to its limited availability. For instance, according to U.S. Energy Information Administration (EIA), the U.S. residential propane price has increased from 2.295 Dollars per Gallon in 2021 to 3.024 Dollars per Gallon in 2022. Thus, the depleting levels of non-renewable natural resources will create hurdles for the propane market's growth.

Propane Market Industry Outlook

Technology launches, acquisitions, and R&D activities are key strategies players adopt in the propane markets. Propane top 10 companies include:

1. AmeriGas Propane, Inc.
2. DCC Plc
3. China Petroleum & Chemical Corporation (SINOPEC)
4. Ferrellgas
5. Saudi Arabian Oil Co.
6. Gazprom
7. Air Liquide
8. GAIL (India) Limited
9. Indian Oil Corporation Ltd
10. Superior Plus and Others

Recent Developments

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