It’s Election Day in the U.K. as I pen this SIMON SAYS, the third election in 5 years, the stakes are high both for the future of Brexit, the future of the National Health Service, and for that matter the future of the World. The wind is howling, the rain is pouring, it’s a truly British day. I’ve just put my X in the box, my decision made, I’ll now need to wait 12 hours at least to find out who is going to win. It’s been a bit like that for the shipping world, which box do they put their cross in, and what does the future hold.
As we come close to the start of 2020, both the production forecast, and the reality, jump ahead another year. Decisions have been made in advance to order new VLGC buildings, although with a lack of any real perceived urgency, and a stutter attributed to all the uncertainty associated with IMO 2020. We have discussed the reasons before, the long memories of the traditional ship owners for when rates struggled to cover operating expenses (OPEX), that has discouraged them from investing in new buildings on any scale at all.
So, we are getting even closer to the implementation of IMO 2020’s Sulphur cap, I bet you’re all prepared and excited to see what happens next, I certainly am! I think ship owners have made their minds up about both the short-term switches they have to make, as well as fueling decisions for future new buildings, especially VLGCs. The big question though is what will sit in the middle for those who have basically said they will “suck it and see”. The buzz is certainly dual fuel, and maybe it will also be part of the reality.
I’m really enjoying looking in on the LPG market from the perimeter fence for once, and there’s no bigger question on my mind than, when? The “when” relates to when are we going to see somebody in the LPG shipping market really break the new building ice, not just crack it in a couple of places. The gauntlet has been thrown down, but will anyone pick it up?
Every time I switch on the television these days I see a box counting down in the top left-hand corner of my screen, more often than not it’s showing how many days to go until Brexit or how long is left on Transfer Deadline day. Soon we will be seeing the same countdown zone appearing on the commodity screens throughout the oil and gas sector, but this time it’ll be specifying how many days to go to IMO 2020.
There seems to be a cat and mouse game going on at the moment, its focus of attention is currently on one export terminal, but it is likely to shape the near-term LPG market for everyone. Who will win and who needs to win, well, we are about to find out? The summer is hot in Houston, it might get even hotter.
I do like hearing the discussions on how there’s record production, record exports and a lot more to come but I do feel the debate then tends to deviate to where LPG is going not how it’s getting there. Huge investments are being made to produce crude oil and natgas, without doubt the NGLs are being extracted for commercial reasons, but increasingly the talk has been about takeaway, I even heard “we’ve just got to make it disappear”.