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1/4/2020 VLGC rates near 4-year high amid global moves to diversify LPG supply sources | Hellenic Shipping
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VLGC rates near 4-year high amid global

moves to diversify LPG supply sources
 in International Shipping News  11/10/2019
Very Large Gas Carrier rates on the key Middle East-Japan route have
touched near four-month highs around $79/mt this week and looked
poised to surpass $80/mt for the rst time since October 2015 as more
ships head to North America and Northeast Europe to lift LPG amid Saudi
supply concerns and growing demand in Asia, traders said.
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1/4/2020 VLGC rates near 4-year high amid global moves to diversify LPG supply sources | Hellenic Shipping News Worldwide
India’s LPG imports have been rebounding steadily since stalling over July and August,
Indonesia is continuing to seek spot cargoes and demand in China is returning this week after
the Golden Week holidays, the traders said.
The steep discount of the FEI propane swap to the Mean of Platts Japan naphtha assessment
has also spurred Taiwan’s Formosa Petrochemical to buy LPG, even though the recent strength
in LPG prices narrowed the discount to $43.50/mt Wednesday and could limit petrochemical
sector appetite.
With uncertainty persisting over the resumption of Saudi Arabia’s LPG supply after the
September 14 attacks on its oil facilities — despite the kingdom’s assurances that crude output
may be restored sooner than the end November target — interest has shifted to supply from
the US, Canada, the North Sea and Australia, traders said.
This puts VLGCs on long journeys, tying up vessel numbers, they noted.
“I think Baltic will go above $80/mt soon; hearing level of last done xture in the East is over
$80/mt,” one shipping source said.
“Now open tonnage in the East for end October is limited, owners are more aggressive about
freight ideas and charterers have no choice but to follow their ideas,” the source added.
Traders said the rising rates will increase costs in particular for end-users in Japan, Indonesia,
South Korea, India and Taiwan.
“It is our concern, but there are many bull reasons; insurance, compliant oil, big exporting
volumes from the US, so our view is also bullish,” one trader said, noting loadings from the US
surged to around 2.3 million mt/month in both September and October. “At this rate, sooner or WEEKLY
later rates are going up to $80/mt,” the trader added. ESTIMAT
Higher war risk insurance due to Middle East tensions and higher bunker prices ahead of the
International Maritime Organization’s lowering of the sulfur limit for marine fuels to 0.5% from
the current 3.5% in 2020 were also adding pressure.
REBOUND FROM 4-MONTH LOW IN AUGUST

Rates in Asia have been rebounding steadily since hitting 18-week lows around $52/mt in early
August, while freight rates on the Houston-Japan hit $125/mt Wednesday, the highest since
July 1, 2016, Platts data showed.
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Shipping, o shore and energy brokerage Fearnleys in its latest report said average vessel
demand in 2019 and 2020 was expected to be substantially stronger than over H2 2016 to end
WEEKLY
2018.
ESTIMAT
It forecast the Baltic index for 2020 to average “just shy of $60/mt” but noted that in today’s
market, with more than 85% vessel demand, the Baltic rate should be above $60/mt — it is
currently around $70/mt.
“Maybe a bit stronger today due to the wide arb. Historically, Baltic gures above $40 should
yield an above breakeven day rate for owners,” Fearnleys said in the report.
It counted 280 VLGCs currently on the water worldwide; 258 for trading and the rest used for
storage.
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“The allocation of free vessels in the West by owners/traders contribute to tightness of WEEKLY
positions in the East. The reason why owners send their eet to the West is varied, such as the
attacks in Saudi Arabia that led to higher war risk premiums, and the arbitrage situation,” the
shipping source said. Ne
Source: Platts
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1/4/2020 VLGC rates near 4-year high amid global moves to diversify LPG supply sources | Hellenic Shipping

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