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| Published：2021.02.19 News Sources：Qingdao Gute Ship Supplies Co., Ltd. Views： | |||
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VLGC rates saw the biggest drop in 20 years!
Freight rates from the Middle East to Japan have been falling sharply since hitting a more than five-year high of $119 a tonne on Jan. 13 and problems with the availability of subcharters have added to the pressure.
According to Platts, the previous big sequential declines in Middle East-Japan freight rates were on July 16, 2015 solstice and September 1, 2015 at $136 and $65.5 per ton, respectively.
According to Platts, on June 23, 2020, the VLGC freight rate was near a two-year low of $23.50 / ton.
In contrast, freight rates interrupted their rebound on March 3, 2014, rising from $38 / t to $133.50 / t on April 28, 2014. On July 23, 2014, shipments of liquefied petroleum gas (LPG) from the US to the global market surged due to the shale gas boom and a severe shortage of VLPG vessels, with freight rates soaring to a record $144.50 / mt.
Since then, 301 VLPG vessels have been on the water, BW LPG said in its quarterly report, with two new vessels ordered and another 19 delivered in 2020, two of which were delivered in the third quarter. There are 19 orders for new VLGC ships in 2021, 11 in 2022, and five in 2023.
A shipping source said:
Shipowners need to accept the market and let their ships sail, or wait for better times. If so, more ships will pile up in America and the East, and prices will take longer to recover.
This year's repairs are still in full swing and I don't think the market will need much activity to bring prices back to normal.
According to Platts, Houston-Japan rates fell to $80 / ton on Feb 4 solstice on Feb 8, the lowest level since July 23, 2020, and then recovered to $83 / ton on FesolsticeBBB1 12.
"Western premium over eastern premium has grown in recent weeks, encouraging shipowners to empty ships to the west, but from a shipowner's perspective, US Gulf supply started to look worrisome on March 2," brokerage Gibson said in a February 11 report.
The ship dock repair
A total of 90 VLPG vessels are expected to be dock docked for special checks in 2021, with up to 46 scheduled for dock in the first quarter, Grieg Shipbrokers said, continuing the busy dock period for LPG vessels in the fourth quarter of 2020.
Grigg added that some of the ships were also undergoing upgrades that would make them unavailable for several weeks.
Market sources said arbitrage activity in the west had stopped because of falling prices in the east. As the harsh winter in North Asia ends, heating demand in the East has waned, while the United States is dealing with cold weather and power shortages.
Mainly because the Faire [Argus Far East propane-swap index] is down, the carry trade has come to an end, the Saudis are cutting production - all of which will of course have a negative impact on shipping. Traders prefer to sublease their own vessels rather than use them, which is another reason rates keep falling.
The recent arbitrage and disruption due to the closure of the Houston Seaway due to dense fog prompted the cancellation of 10-11 LPG vessels from the US to Asia in February, which will reduce our cargo arrivals to Asia from 2.3 million tonnes in February to 1.6 million tonnes in March.
China is now returning to the liquefied petroleum gas market after the holiday, according to the general analysis. If China urgently restocks, we will see a build-up in the Middle East. However, China's return to the LPG market could be delayed if it can easily use its stockpiles.
North Asia H2 propane deliveries for March rebounded to $578 / t on February 15 from $545 / t on February 10, according to Platts data, which is also expected to return due to the completion of maintenance at PDH plants in China at the end of March.
Saudi Aramco is expected to announce this week that it has accepted another round of cuts proposed in March, following its decision to curb crude production in February and March in line with the Opec + commitment.
However, Qatar Petroleum and ADNOC announced their acceptance of the March shipment offer, without cuts and delays, and also announced several Middle East spot tenders, which could support shipping activity.
"We did not expect such a big drop in the LPG industry and no one expected it to fall to such a low level," the shipping source said. Maybe the market will pick up after the Chinese New Year."
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