Time charter equivalent (TCE) revenues for very large gas carriers (VLGCs) on the Ras Tanura to Chiba and Houston to Chiba routes reached year-to-date highs on 21 February, buoyed by an increase in demand for vessels, particularly from the US Gulf coast, and rising delays at the Panama Canal.
The Houston-Chiba VLGC TCE rate closed just over $83,000/d on 21 February, the highest since 29 December. Increased vessel demand out of the US Gulf, combined with rising delays at the Panama Canal, have contributed to a tighter VLGC market, inflating the cost of freight. The Houston-Chiba VLGC freight rate rose by $18/t to close at $153/t on 21 February, which was also highest level recorded since 29 December.
US propane exports increased to 1.84mn b/d in the week that ended on 10 February, up from 1.34mn b/d in the week before, according to the US Energy Information Administration (EIA). That marks the highest weekly propane export figure reported by the EIA since tracking began in 2010, although market participants tend to look more closely at monthly figures. Still, a wider arbitrage to Asia, where delivered propane prices on the Argus Far East Index (AFEI) surged shortly before the lunar near year, has bolstered demand for VLGCs to export product from the US.
The March AFEI/LST propane spread traded around $232.50/t on 21 February, up from $220/t a week earlier. Attention has now moved to April, as market participants try to optimise use of the arbitrage. The April AFEI/LST propane spread traded around $197/t on 21 February, up from $181/t a week earlier.
US propane inventories fell to 66.3mn bl in the week that ended on 10 February, but stocks were still 58.2pc higher on the year. The EIA estimates that US propane stocks will stand at around 52.7mn bl by the end of March, up by 45pc on the year and 9.8pc higher than the five-year average for the time of year.
Meanwhile, waiting times at the Panama Canal have edged up over the past week. The estimated waiting time for an unbooked vessel transiting northbound through the Neopanamax Locks reached 12 days on 21 February, the highest level recorded since 15 December, according to the Panama Canal Authority. Delays for a southbound transit were around eight days on 21 February.
Panama Canal delays can have a profound impact on VLGC freight rates, creating inefficiencies in the global fleet.
In the east of Suez market, the Ras Tanura-Chiba VLGC TCE rate closed just shy of $86,000/d on 21 February, the firmest it has been since 30 December, buoyed by the tightening of vessel availability. And the bellwether Ras Tanura-Chiba VLGC freight rate closed at $101.50/t on 21 February, also the highest recorded since 30 December. The rate has been trending upwards since the market bottomed out at $57/t on 24 January.