The U.S.-Asia propane export arb remained open in early January but narrowed as Mont Belvieu prices soared, shrinking the spread to Asia FEI propane, which was only partially offset by a collapse in freight rates. VLGC freight rates were dramatically lower in early January. Spot LPG freight rates from the U.S. Gulf Coast to Chiba, Japan, (via Panama Canal) plunged by $119/MT (22.7 c/gal) to $105/MT (20.2 c/gal as of January 17, which is 53% below the rate on January 2. Spot terminal fees (resale differentials) were also weaker over the period, as values fell by 2 c/gal with a 6 c/gal fee for H2 February loadings as of January 17. The price differential between Mont Belvieu Lone Star (LST) propane and the Far East Index (FEI) narrowed dramatically over the last two weeks. On January 2, the differential was $301/MT, or 57.8 c/gal. On January 17, the differential was only at $184/MT, or 35.3 c/gal (see figure below). For comparison purposes, the spread has averaged $252/MT (48.4 c/gal) in 2023 and was only $171/MT (32.8 c/gal) in 2022.
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- Analyst Insight
Spot LPG VLGC Freight Rates Continue to Weaken; U.S.-Asia Propane Export Arb Narrows
LPG VLGC (Very Large Gas Carrier) spot freight rates out of the U.S. Gulf Coast to Asia have collapsed since the beginning of the year primarily due to a significant narrowing of the spread between Far East Asia (FEI) propane prices and Mont Belvieu (LST).
- Blog
Let's Get Physical, Part 2 - A Step-by-Step Guide to Making an International LPG Trade
In October, some 45 MMbbl of liquefied petroleum gases (LPGs) were loaded onto ships and sent out from U.S. ports, more than 80% of it from Texas Gulf Coast terminals. Most propane and normal butane exports are tied to long-term deals between U.S. suppliers and overseas buyers, but a substantial share involves third-party LPG traders who cut deals to buy LPG, arrange for shipping and terminaling, then sell the LPG to buyers in distant lands. How exactly does all this happen? Today, we continue a series on how U.S.-sourced LPG makes its way to Asia, Europe and other key export markets.
- Analyst Insight
Spot LPG VLGC Freight Rates Soar
Spot LPG VLGC freight rates peaked at $254/MT, or 48.7 c/gal, on September 25, up 82%, or $114/MT, since the beginning of the year. And the surge in fright can’t be blamed on delays at the Panama Canal this time. Currently, wait times at the Panama Canal (Neopanamax) are only 7 days northbound and 2 days southbound.
