LPG Shipping Faces Rough Weather
After reaching record levels during the first four months of 2017, U.S. LPG export cargoes have seen a number of cancellations or deferments in June and July, said Dorian LPG in a press statement.
Steady domestic demand has kept U.S. propane prices firm and, therefore, priced above levels conducive to the arbitrage trade. U.S. propane inventories have continued to build in recent weeks and could reach levels of 75 million barrels by the end of September 2017.
The overall U.S. exports at the half-year mark remain at similar levels to 2016 due to the cancelled cargo volumes from the U.S., driven by waning Far East demand caused by seasonal factors and high inventories.
Chinese imports in May 2017 hit a new record of over 2 million metric tons, reaching a monthly average year-to-date of over 1.5 million tons, a level higher than the 1-1.25 million tons originally projected. Chinese import volumes in June 2017 followed the trend higher, and firm propylene prices have recently supported good CFR pricing from PDH plants.
The congestion experienced with Panama Canal transits, coupled with steady decline in freight rates for the Houston to Chiba voyage, has caused VLGCs to opt for the long route around the Cape of Good Hope, thus creating more ton miles and global fleet utilization. The Eastern market may be moving into contango as more vessels are requested to slow steam and recent fixtures provide for storage options.
The order book stands at approximately 11% of the VLGC fleet while the old VLGCs over 20 years of age currently comprise 15% of the fleet. We maintain our thinking that stronger demolition prices and new environmental regulations will make older VLGC vessels more attractive demolition candidates that will be removed from the global fleet. However, there can be no assurances that any such developments will occur.
Liquefied gases are primarily used for industrial and domestic heating, as a chemical and refinery feedstock, as a transportation fuel and in agriculture.
The LPG shipping market is typically stronger in the spring and summer months in anticipation of increased consumption of propane and butane for heating during the winter months. In addition, unpredictable weather patterns in these months tend to disrupt vessel scheduling and the supply of certain commodities.
