VLGC rates keep falling, but opinions differ as to the culprit.
Rates for the large LPG carriers slipped again on Thursday, with Jefferies reporting the market average at $25,000 per day, down considerably lower than day-over-day and week-over-week.
Some have blamed the lull in rates on terminal fees eating into freight earnings, but Jefferies analyst Omar Nokta said those arguments were “misconstrued”.
“It is simply LPG traders that are now capturing the lion’s share of the arbitrage as opposed to the shipowner,” he said.
The fee argument was made by Fearnleys earlier in the week. The charges were described as being “extraordinarily high”.
But for both Nokta and Clarksons’ Frode Morkedal, the problems were more supply-demand based.
Nokta said under normal circumstances, a VLGC owner would capture two-thirds of the $200 per tonne spread between US and Asian LPG prices, which would imply $80,000 per day rates.
But normalising Panama Canal conditions — a major driver for the market last year — meant more ships on the water competing for cargoes, both said.
Morkedal characterised the situation as lacking spot cargoes.
The banking arm of the shipbroking giant assessed VLGCs at $24,300 per day, a 9.8% drop from Wednesday and $39.7% week-over-week.
“The west-east arbitrage has reached levels not seen since last winter, helped by US propane and propylene stocks at the upper end of their five-year seasonal range,” he said.
“However, a lack of spot cargoes has been weighing on the market, a situation that worsened as Hurricane Francine forced [exploration and production] companies in the Gulf of Mexico to shut in production last week.”
