Some very large gas carrier (VLGC) owners are holding back from offering vessels in the Mideast Gulf, market participants said, as rates soar with renewed hostilities between Israel and Iran driving up operational risks.
VLGC rates from the Mideast Gulf surged on 13 June. Argus' Ras Tanura to Chiba route jumped by $7/t to a nearly one-month high of $76/t, supported by higher operational risks and reduced competition among shipowners in the region.
While some shipowners have not been offering vessels for Mideast Gulf cargoes, others appear to be waiting for more concrete interest from charterers before making their ships available, market participants said.
While some shipowners try to avoid the Middle East, more vessels may look into ballasting to the Atlantic basin, which could add pressure on freight rates from the US Gulf if the situation persists in the coming weeks on increased vessel supply.
But in the meantime the number of vessels available to load in the US Gulf is balanced with cargo numbers, which means that freight rates could rise in the near term if more charterers turn to the Atlantic to replace Mideast Gulf tonnes.
Market participants are closely watching Saudi Aramco's July loading acceptances, expected this week, which are likely to offer a clearer signal of chartering appetite in the wake of the conflict.
This comes as Chinese importers still face a 10pc tariff on US cargoes under the 90-day levy reprieve agreed by Beijing and Washington in May, which further disrupts LPG supply flows to the country.
China imported 849,000t of Iranian LPG in May, up by 24.6pc from 681,000t a year earlier, Kpler data show, exceeding US-origin tonnes for a second consecutive month. US LPG imports into China plunged by 78.3pc to 356,000t in May from 1.6mn t a year earlier.
Former chief executive of Avance Gas Oystein Kalleklev noted that around 57 VLGCs had been involved in Iran-China LPG trade by February. Any curtailment of that flow, he said, could increase demand for non-dark fleet vessels and boost tonne-mile demand, while also opening up arbitrage opportunities that would support freight rates higher.
