We’re coming up to the Christmas festivities and the sentiment in the market is extremely robust. Although the physical commotion isn’t anywhere near resembling Oxford Street on Christmas Eve, in itself it’s maybe a hint that there aren’t that many spare cargoes loitering around in the market, especially for delivery in January 2020.
It always seems difficult to apply the right adjective to a market, strong and weak cover all magnitudes, booming, roaring, explosive, rocketing, rising, surging are all to be found in your on-line thesaurus, but I’m not sure if they are on the button when it comes to what the market showed last week. Asia appears to be moving from reasonably firm to a lot stronger, I guess I’ll have to make do with those descriptive words for now. I used to get excited with sudden jumps in any market, especially if our position just happened to be on the right side of the jump.
I was a little stunned to read during my morning LinkedIn flick through, that BW LPG’s CEO Martin Ackermann has decided to step down at the end of the year, after five years at the helm. I was lucky enough to share a panel discussion with Martin in Houston this year at RBN’s “Energy Xport Con”, and although I’ve only known him for a short while, I was impressed how focused, and cool he was under the spotlight of the U.S. energy, and particularly NGL players.
I’ve always been fascinated with the way deals are done, the process of negotiation between two parties, maybe with someone in the middle, maybe not. It can be exciting, frustrating, win some, lose some. I think I was more a guy who wanted compromise, while I ended up doing deals with a number of traders hanging out for the last cent, even though I’m sure I would have done more with them if only they had shown a sign of compromise, it’s always good to blame the other party.
Although last week was shortened by the Thanksgiving holiday, a few more pieces seemed to be falling into place in the U.S., and for that matter when moving out of the U.S. as well. If we then add in a few what might or might not happen questions, it was actually an eventful last week of November. Then came the attention on the U.S. from Asia, concern may be, as well as from a small number of trading houses nestling in the major cities of Europe. But why the concern?
As Thanksgiving holidays approach over in the U.S., we’re experiencing this paradox of having the signs of winter in the midcontinent, stocks dropping over 6 million barrels throughout the U.S. in the last two weeks, but propane exports have just hit a season’s high, with over 1.36 million barrels moving over the docks in the U.S. Gulf, U.S. east and west coasts. Mont Belvieu propane prices have surged on the back of not only the cold weather, but also the hefty export volumes, ending up close to 56 cents/ gallon, while the market was below 40 cents/gallon only 3 months ago, that’s up 40%.
I still believe that if you have any serious intentions to be a player in the LPG world, you need a ship, whether you own it or charter it doesn’t really matter, all that counts is that you have one. Now a lot of people will remind me that the market has been on its knees many times over the last ten years or so, and for many periods before that, and isn’t this just me trying to ride the wave of the current strength in the freight market.
It’s one of the most exciting parts of trading is not just buying a cargo somewhere, anywhere, but being able to fix a ship to load it, especially a Very Large Gas Carrier (VLGC). Of course, I like the pressurised, semi-refrigerated, mid-sizes etc., but to me the big ships are the heart of international LPG trading. I explained in Monday’s SIMON SAYS how the two cost elements of the ARB are the terminal fees, and the freight rate applicable for the Houston to Chiba, Japan voyage.
The summer holiday clothes, the sun cream and photos, are now all destined for the physical and electronic storages, the kids are back, or going back, to school (hooray!), the northern hemisphere nights are drawing in, Love Island is but a dream and those winter TV series are all about to re-start! The structure of our lives is therefore about to change, so why not the structure of the LPG market?