Lower rates, higher bunkers squeeze VLGC TCE earnings

Market: LPG
25/02/22

Time charter equivalent (TCE) earnings on the two main very large gas carrier (VLGC) freight routes have fallen significantly since the start of the year, with shipowners' costs raised by climbing bunker fuel prices.

The decline in TCE earnings is also because of lower spot VLGC freight rates.

Spot rates for the bellwether Ras Tanura-Chiba route have averaged $46.17/t so far this month, down from $66.30/t in January. The Houston to Chiba spot rate has been $93.96/t on average in February, down from $112.24/t in January. The latter rate fell to $80/t on 24 February.

Booking activity from the US Gulf coast got off to a fast start at the turn of the year with around 15 fixtures in the first 12 days of January, spurred by a rise in the February LST/FEI propane spread to $169-170/t. But activity slowed when US winter heating demand increased. This pick up in consumption during January and throughout February weighed on propane inventories, and consequently lifted the cost of propane at the Gulf coast hub of Mont Belvieu in Texas to levels where it closed the arbitrage between the US and Asia-Pacific.

This coupled with delays at the Panama Canal at the end of January and early February to mean exporters are less willing to pick up incremental cargoes for loading in late February and March.

Waiting times at the Panama Canal rose to more than 10 days from 26 January-7 February, and have averaged seven days northbound and six days southbound this month. Delays at the canal can affect exports, with charterers having to factor in the risk of late delivery, especially on southbound voyages with laden VLGCs destined for east Asia.

The arbitrage was as low as $110/t on paper on 23 February, but picked up to $120/t yesterday. This gap needs to cover freight and terminal costs, as well as risk of delays, to be attractive for spot trade.

At the same time bunker fuel prices have risen significantly. The price of 0.5pc sulphur 380cst bunker fuel, dob Fujairah, has averaged $734.86/t this month, up from $659.21 in January and $460.29/t in February 2021. Prices have risen particularly this week, reaching $801/t yesterday with dob Houston prices following a similar trend.

Bunker fuel costs are shipowners' largest variable cost, so the increase has cut into TCE earnings. Ras Tanura to Chiba VLGC earnings fell to $12,606/d yesterday, the lowest since 14 July, and Houston-Chiba earnings fell by nearly $11,000/d to $19,622/d, the lowest since at least the first quarter 2021. The latter peaked this year at $60,000/d on 11 January.

Looking ahead, vessel availability is ample in the US Gulf and in the Mideast Gulf, while the narrow arbitrage between the US and Asia-Pacific does not favour exports. Several vessels remain open for charter in the first and second half of March, so freight rates could remain under pressure.

But with the US heating season drawing to a close consumption will begin to ease, softening LPG prices, which could allow for more exports with a wider arbitrage.

By Jamie Aldridge

VLGC TCE earnings $/day

VLGC freight rates $/t

Bunker fuel prices $/t

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News

07/05/25

Polish seaborne LPG imports rise on Russia embargo

The EU ban on some Russian imports led to higher utilisation of Poland's Baltic Sea terminals, writes Waldemar Jaszczyk London, 7 May (Argus) — Polish seaborne LPG imports surged in the first quarter as the country's Baltic Sea terminals became the market's main supply route following the EU's ban on Russian propane-butane mix and propane arrivals. But the growth was capped by reduced re-exports to Ukraine, softening domestic demand and more butane arriving from Russia. The four Baltic Sea terminals received 320,000t of LPG in January-March, up from 282,000t a year earlier, Kpler data show. European LPG distributor SHV's 900,000 t/yr Gdansk facility received 181,000t, and the Alpetrol-run 420,000 t/yr Gdynia terminal took 89,000t, up by 26pc and 37pc, respectively. Deliveries to state-owned fuel supplier Orlen Paliwa's 250,000 t/yr Szczecin terminal rose by 24pc to 37,000t but were below the 50,000-60,000 t/yr seen in previous years given modernisation works. The firm plans to raise Szczecin throughputs by 50pc to 400,000 t/yr by mid-2025. These offset a decline in imports to petrochemical producer Azoty's 437,000 t/yr propane dehydrogenation (PDH) complex in Police by more than a half to 19,000t. Azoty is negotiating a sale of the plant to Polish oil firm Orlen as it looks to cut debt accrued largely to develop it. The EU embargo on Russian LPG, which took effect on 20 December, boosted seaborne intake by forcing Polish importers to shift their supply routes to northwest Europe. Propane and propane-butane mix accounted for over 90pc of Russia's LPG exports to Poland, while normal butane and isobutane, which are not sanctioned, took the balance. Russia was the key supplier to Poland historically, with a 43pc share of all imports in 2024 at 1mn t/yr, according to Polish LPG association POGP. But weaker import demand as a result of stockbuilding prior to the embargo's start and reduced re-exports to Ukraine, which has shifted its supply routes to Danube river ports in the south, limited the increase in seaborne arrivals. And rising intakes of pure normal butane and isobutane from Russia by rail, which is then blended with propane and sold as autogas, has also weighed on Baltic imports. Russian butane deliveries averaged around 30,000 t/month in the first quarter compared with the more typical 80,000 t/month prior to sanctions. Poland seaborne LPG imports Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Find out more

News

NWE propane prices bounce back from multi-year lows

07/05/25

News

07/05/25

NWE propane prices bounce back from multi-year lows

Prices have recovered from a ‘Liberation Day' slump but have not yet reached their pre-tariff level, writes Efcharis Sgourou London, 7 May (Argus) — Northwest European propane prices have rebounded after slumping in the wake of US president Donald Trump's tariff announcement on 2 April. But they remain below pre-tariff levels after Trump ratcheted up his trade war with China a week later. Propane swaps and large cargo prices on a cif Amsterdam-Rotterdam-Antwerp (ARA) basis hovered at $450-460/t over the second half of April, more than $80/t above the five-year lows reached on 9 April, when Trump watered down tariffs on all but China, hiking this rate to 145pc. But prices were still more than $100/t below where they stood prior to Trump's announcement on 2 April. An unexpected lack of availability when spot buying interest emerged over the second half of April helped the large cargo and swaps values rebound. A few bids lodged for a mid-to-late-May delivery of 22,400t lifted the physical price relative to front-month paper to premiums of $9-12/t, after it had fallen to a discount of $1.50/t in early to mid-April, when the price collapsed. The unmet bids shed light on the level of premium needed to lure regional selling, while fears of an excess of US LPG being redirected to Europe owing to its trade war with China cooled as the market awaits the wider ramifications later this month — Beijing's 125pc retaliatory tariff on US goods starts from 13 May. Just over 600,000t of US LPG was shipped to northwest Europe in April, largely unchanged on March and close to the rolling six-month average, Kpler data show, while about 400,000t is forecast to arrive in May as of 7 May. The US-northwest European arbitrage is also unfavourable for spot trade despite recent cif ARA price gains. North Sea selling was also stable last month compared with March, with the UK and Norway exporting 400,000t of LPG in April, and forecast to ship just over 300,000t in May as of 7 May, according to Kpler. But this is significantly lower than a year earlier as production in the North Sea continues to undershoot expectations. NWE large cargo propane, swap price Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

India mulls swapping Mideast Gulf and US LPG

07/05/25

News

07/05/25

India mulls swapping Mideast Gulf and US LPG

Indian importers could make $20-30/t if they swap Middle Eastern term imports with US cargoes, writes Rituparna Ghosh London, 7 May (Argus) — Indian LPG importers are considering swapping contracted imports from the Middle East with US cargoes to enable them to ship the former supply to China, owing to its 125pc tariff on US LPG, according to market participants. Abu Dhabi's Adnoc has offered to supply Indian buyers with discounted US cargoes compared with Mideast Gulf exports priced on the basis of state-run Saudi Aramco's contract price, traders say. The Middle Eastern supply can then be sold to China to meet its shortfall from lost US imports of mainly propane because of the tariff. Indian state-run refiner BPCL says it can make a $20-30/t profit on swapping Mideast Gulf and US cargoes. Rival firms and importers IOC and HPCL have yet to disclose if they are considering cargo swaps. Delhi has directed importers to guarantee enough supply arrives if the US-China tariffs lead to such swaps, which is likely to include more imports from the US. The US loaded four evenly split propane-butane cargoes on to the VLGCs Eneos Gunjo , BW Mindoro , Shahrastani and Vivit Dubhe over 14-23 April, which are headed to India for delivery in the second half of May, ship tracking data show. Traders in Singapore have meanwhile approached Indian refiners to purchase their term imports from the Middle East for resale in the spot market — an offer that has been declined by the refiners. Delhi has said it is considering eliminating a 2.5pc import tax on US LPG and ethane in order to strengthen trade ties with the US. But the rate is small and IOC, HPCL and BPCL are already exempt from it, meaning the impact would be negligible, market participants say. Private-sector firm Reliance Industries would benefit from the move as India's sole importer of US ethane, bringing in around 1.3mn t in 2024, down by a fifth from a year earlier, Kpler data show. India's LPG imports from the US have historically been miniscule. The country brought in 120,000t of US LPG from a total of 21.4mn t last year, with most of its supply coming from the UAE at 8.2mn t, Qatar at 5.1mn t and Saudi Arabia at 3.4mn t, according to Kpler. Around 85-90pc of India's LPG imports are tied to long-term contracts with these three Middle Eastern countries, while spot trading represents just 10-15pc. India also imports mainly evenly split propane-butane cargoes, while US exporters ship more full propane cargoes to China. Ethane appeal The removal of the tariff on US ethane is unlikely to have much impact on imports in the short term given a lack of infrastructure to accommodate it. But it will support India's long-term plan to use more US ethane for its expanding petrochemical industry. BPCL and state-owned gas firm Gail are investing in new ethane-fed cracker projects at existing petrochemical facilities to capitalise on the abundant availability of cheap US ethane and the growing fleet of very large ethane carriers. This follows Reliance switching to US ethane at its 1.5mn t/yr ethylene cracker in Jamnagar in west India's Gujarat state over the past few years, having previously relied on ethane extracted from LNG imports from the Mideast Gulf. Gail operates two 450,000 t/yr crackers at its Pata petrochemical plant in Uttar Pradesh in northern India, which can use either ethane or propane. This arrives through the Hazira-Vijaypur-Jagdishpur pipeline having been fractionated and processed from LNG at Hazira on the west coast of Gujarat. BPCL is also increasingly integrating its refining operations with petrochemicals, but only has 500,000 t/yr of propylene capacity at its 310,000 b/d Kochi refinery in Kerala. BPCL is investing close to $6bn to develop a petrochemical complex including an ethane-fed cracker at its 156,000 b/d Bina refinery in Madhya Pradesh, while Gail is spending a similar amount on a facility that will include a 1.2mn t/yr ethane-fed cracker near its 5mn t/yr LNG plant at Dabhol in Maharashtra. US LPG exports to India US ethane exports to India Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

US targets Iran’s LPG exports pre-nuclear talks

07/05/25

News

07/05/25

US targets Iran’s LPG exports pre-nuclear talks

US efforts to curtail Iran's LPG exports may prove fruitless as Tehran's key trade with China is independent of the sanctioned firms, writes Ieva Paldaviciute Dubai, 7 May (Argus) — The US Treasury Department has for the first time imposed sanctions directly targeting Iran's LPG industry, as it looks to exert pressure on a sector involved in significant exports to China. The US Treasury on 22 April announced sanctions on Iranian "LPG magnate" Seyed Asadoollah Emamjomeh, his son Meisam Emamjomeh, and his corporate network, which is "collectively responsible for shipping hundreds of millions of dollars worth of Iranian LPG and crude oil to foreign markets". This includes Emamjomeh's Tinos I — a 93,000m³ (55,000t) VLGC built in China in 2024, which allegedly attempted to load LPG from a terminal in Houston for export to China on its maiden voyage in June 2024. Washington recognises that Iran's LPG industry is a major source of revenue for Tehran, funding the regime's nuclear and advanced conventional weapons programmes and its support for terrorist proxies in the Middle East. The US administration continues to impose new sanctions on Iran despite both sides attempting to ease tensions as they hold high-level talks on Iran's nuclear programme, after US president Donald Trump ordered his administration to exert " maximum pressure" on Tehran . Yet the sanctions' impact on LPG trade may prove limited. "The nature of [Iran's LPG trade with China] is independent of Emamjomeh or his son and will continue pretty much as is," consultancy FGE's Middle East managing director Iman Nasseri says. "Sanctioning these companies only adds extra costs to the middlemen, who switch to other companies that they have or will set up, while changing the name or ownership of a vessel is also very easy." Iran's LPG exports boomed during 2022-24 , largely owing to less-stringent sanctions under former US president Joe Biden. China is the dominant buyer of Iranian LPG, taking 8.3mn t of the 10.7mn t exported from Iran in 2024, Kpler data show. This figure is an estimate as tracking Iran's exports is complicated by its use of a " shadow fleet" of LPG carriers . "The illicit [Iranian LPG] network has many nodes, and it is more difficult to choke them all off, especially if the US is wary of undermining other trade with countries such as the UAE, Oman, Malaysia and others [that receive Iran's LPG]," US think-tank the Center for a New American Security's adjunct senior fellow Rachel Ziemba says. "At the same time, the US could now be less worried about undermining relationships with China as direct US-China trade is collapsing." China's imports of US LPG, mainly propane, are on course to end from mid-May when Bejing's 125pc tariff kicks in. China is considering exemptions for ethane . But there has been no indication that US propane will also be given a reprieve, according to market participants — in spite of the Chinese petrochemical sector's dependence on it. China is increasingly turning to the Middle East for supplies, but these shipments largely come with butane in split cargoes. Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

Mexican economy grows 0.6pc in 1Q

30/04/25

News

30/04/25

Mexican economy grows 0.6pc in 1Q

Mexico City, 30 April (Argus) — Mexico's economy expanded at an annualized rate of 0.6pc in the first quarter, with solid growth in the agriculture sector offsetting a slowdown in industry. The result came in at the high end of analyst estimates and slightly above the 0.5pc GDP growth reported by statistics agency Inegi for the fourth quarter of 2024. Still, it marks the second-slowest quarterly growth in the past 16 quarters. Most of the first quarter's GDP growth came from a 6pc expansion in the agricultural sector, which more than reversed the 4.6pc contraction recorded in the fourth quarter of 2024. The industrial sector — including mining, manufacturing and construction — shrank for a second straight quarter, contracting by 1.4pc after a 1.2pc drop in the previous quarter. Manufacturing faced tariff-related uncertainty during the quarter, though investment in the sector had already been slowing for months. The contraction was softened by manufacturers ramping up production ahead of US tariffs, with the risk of trade-driven inflation also pushing builders to contain construction costs, according to market sources. These effects are expected to fade in the second quarter and worsen in the third if high US tariffs on Mexican goods persist, said Victor Herrera, head of economic studies at finance executive association IMEF, "especially as supply chains are hit by dwindling inventories." Services expanded by an annualized 1.3pc in the first quarter, compared with a 2.1pc growth in the fourth quarter of 2024. This marks the slowest growth in services since the end of Covid-19 restrictions in early 2021. By James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more