Persian Gulf to Japan VLGC rates extend fall to over 15-month low


Very Large Gas Carrier rates on the Persian Gulf to Japan route extended losses, hitting over 15-month low to under $29/mt this week, as tepid demand for Middle East LPG and lower Saudi supply kept charterers sidelined amid ample vessel supply and trader relets, market sources said.

Freight was at $28/mt on June 11, matching the level on March 6, 2019, S&P Global Platts data showed.

“There are just too many vessels around at the moment, hence cargo holders are in no rush to fix in,” a shipping source said, echoing market views that several trader relets were seen spread throughout the rest of June.

“I would not be surprised if rates will continue further down in the short term, but should be close to bottom I believe.”

Shipping activity has been muted recently following a pause in Indian and Indonesian buying, after the intense activity seen over April-May, while Saudi Aramco has canceled or deferred some term cargoes for May and June, even as lifters are expected to reduce nominations for July-loading Saudi cargoes.

However, Middle East supply is kept steady by Qatar Petroleum and ADNOC, while Kuwait Petroleum Corp. had a cargo to sell, traders said. At least three trading firms were also offering Middle Eastern cargoes this week for late-June-early July loadings.
Challenging short-term outlook

The shipping source said while the VLGC market might see “a good run” of fixtures during the first 10 days of July from the Middle East, he was uncertain if that would “help out in the long run on the rates”.

“We need demand to pick up and arbitrage opening up ex-US,” he said, noting market views that while there had been more activity in the US, it was not enough to lend much support to freight.

“In the short term it seems it is still challenging on freight rates,” he added.

VLGC rates on the Houston to Japan route was at $56/mt on June 11, the lowest since February 15, 2019 when it was at $55/mt, S&P Global Platts data showed.

Other sources said other than the subdued rates, the VLGC freight sector is also grappling with costly bunker fuel.

The 380 CST HSFO market has been supported by steady bunker fuel demand in the overall shipping industry, hitting $240.93/mt on June 8, the highest since March 6 before the plunge in crude futures. It has since eased to $230.35/mt on June 10, Platts data showed.
Source: Platts



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