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?
At a recent gathering of the good and the mighty in Athens, I understand a distinguished ship owner was able to hold a relatively straight face when explaining the challenges, or something along those lines, faced by the VLGC ship owners in the current mesmerizingly strong LPG shipping market. I’m sure every investor who boarded the run early, maybe even after reading my summer and autumn SIMON SAYS blogs, is sitting extremely comfortably today as he checks his share portfolio. But what happens next, is there going to be a twist, there usually is!
It’s a bit like trying to find a red bus on London’s Oxford Street when you really need one, just when the market could have done with a few extra LPG cargoes appearing from the U.S. Gulf, as well as more clarity on when new midstream and export expansion capacity was about to arrive, nothing much happened, but the clock keeps ticking, and with the blink of an eye we will be seeing in the New Year, 2020. It looks to me as if all those red buses are going to arrive pretty much all at once, but will we have enough passengers, or in our world, NGL production, to fill the bus up.
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.
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?
How on earth can we explain the strength being shown in the Very Large Gas Carrier (VLGC) sector these days, as it pushes to levels not seen since this time in 2015. All the pain and anguish the ship owners have had to suffer since 2015, now seems to be far behind them, instead the market is burdened with high rates, lack of tonnage availability, and the sobering reality of potential delays incurring the current exorbitant cost of demurrage.
When I look at history it shows me how we take for granted the way we act in today’s world, but it also shows me how much markets evolve. My goal is not to academically narrate or verify what did or did not happen, but to give you a sense that LPG wasn’t just the cast-off side of the petroleum business, that it actually had a life of it’s own.
One significant piece of the U.S. LPG export puzzle, taking something of a back seat behind record LPG production, NGL takeaway problems, lack of pipelines, fractionation constraints, Mariner East 2, export terminal expansions, IMO 2020 and the strong VLGC market, to name but a few, is the Panama Canal, which will have to come more into focus, it’s just a matter of time!