Vessel Over-Availability Drives VLGC Freight Rates to 10-Month Lows

(July 24, 2017) S&P Global Platts reports that very large gas carrier (VLGC) freight rates for routes out of the U.S. Gulf Coast have dipped to 10-month lows on an over-availability of vessels as propane cargo cancelations continue to plague the market. Freight rates to Northwest Europe from Houston have fallen to $20 a metric tonne, while the route to Japan was unchanged in mid-July at $43 a tonne. But both were at lows not seen since September 2016.
VLVC Cardiff Gas LPG Ship

“There’s lots of ships so the Gulf market will continue cratering,” a broker told S&P Global Platts. Rates to Japan have fallen $14 from the June high of $57 a tonne, while the route to Europe has lost $7.50. The consultancy reports that VLGC freight rates were at their highest in late January.

Further, market sources told S&P Global Platts that five to 11 cargos have been canceled in July. An additional three were initially canceled but were resold and subsequently lifted. In canceling a cargo, a company opts to pay the cancelation fee, which is sometimes 50% to 75% of the lifting fee, rather than take the cargo and sell in a weak market.

S&P Global Platts notes that Mont Belvieu propane prices have remained strong over the spring and summer on low inventories coming out of a draw season that saw record levels of U.S. propane exports. While stocks have been growing since late April, they remain 25 MMbbl below levels seen in July last year. Overall, May and June saw more than 20 cargo cancelations, sources report. VLGCs can carry 44,000 metric tonnes of propane, which equates to about 500,000 bbl.

(SOURCE: The Weekly Propane Newsletter, July 24, 2017. Subscribe at