VLGC earnings at highest level since early 20
by, Max Tingyao Lin/Lloyd´s List, Maritime Intelligence
TCE of VLGCs has risen above $21,000 per day with further upside in the US Gulf expected. Freight earnings of very large gas carriers have risen to their highest since early 2016, with buoyant vessel demand in the US Gulf and the Middle East on the back of arbitrage flows to Asia in the VLGC and LPG market.
According to the Baltic Exchange, rates for shipping liquefied petroleum gas from the Middle East from Japan hit $39 per tonne on July 10 before easing off to $36.75 on July 13, still 25.5% higher on month.
LPG shipping rates for the Houston-Chiba route via the Panama Canal were about $68-$69 per tonne, while the Houston-Flushing route encountered rates as higher as $39 per tonne, according to Clarksons’ assessments.
Stifel estimated the time-charter-equivalent earnings of a 82,000 cu m vessel at $21,500 per day, compared with the year-to-date average of $15,354 so far this year.
While the rally in the Middle East has slowed on a number of trades’ relets, falling US propane prices have resulted in improved arbitrage economics for US-Asia trade, according to market players.
“We are…seeing more trader relets slowly appearing in the market from end July and early August dates and this is subsequently adding some pressure to the Baltic [route],” Fearnley said in a note.
On the other hand, the US price weaknesses have come amid rising inventories during summer, with the Energy Information Administration data showing propane and propylene stock levels in the US Gulf reaching 35.2m barrels as of July 6 versus 28.4mb on June 8.
“US export economies are steadily improving as propane inventories are on the rise…putting pressure on domestic prices,” Morgan Stanley said in a research note.
“At the same time, propane prices in the Middle East have strengthened, tracking the rise in oil prices, creating ample trading opportunities for arbitrage between West and East, therefore shifting shipping demand.”
Brokers at Clarksons have also overserved tight tonnage situations in the US Gulf, with a handful of cargoes in the region still unfixed.
“There was a lot more discussion in the West…with a number of cargoes fixed at steadily increasing rates,” the brokerage said in a note.
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