US Gulf very large gas carrier (VLGC) freight rates climbed to $305/t on the Houston-Chiba route this week, the highest since Argus began assessments in 2013.
Demand has switched to the longer US Gulf-east Asia route to replace lost supply caused by the effective closure of the strait of Hormuz. This shift led to a rush of bookings for May-loading cargoes, resulting in higher demand for Panama Canal transit slots and rising costs there. Some VLGCs were redirected on the longer Cape of Good Hope route.
The rush of bookings has depleted much of the available tonnage in the US Gulf, but demand for LPG remains high with India and China facing significant shortages because of the lost Mideast Gulf supply. Chartering activity has continued in the US Gulf, but the rush of May bookings has left charterers competing for a rapidly shrinking pool of tankers, pushing the rates up.
The Houston-Chiba rate hit $305/t on 13 May, with two fixtures around that level. That is more than double pre-war levels of $147/t, having accelerated through $248/t in late April and $293/t last week.
The vessel shortage reflects the much longer journeys, not increased demand for VLGCs, as the loss of Mideast Gulf supply has reduced global product availability.
Around half of the 120 VLGCs that loaded in the US Gulf in April were routed via the Cape of Good Hope after Neopanamax slot auction prices hit $1.076mn on 29 April — the highest since May 2024 and roughly four times pre-conflict levels. The longer routing adds more than 20 days to voyage times compared with the Panama Canal passage, occupying vessels for longer and slashing available tonnage ahead of the June loading window.
Fixing activity has fallen sharply as a result with charterers securing around 24 spot and time charter bookings from the US Gulf for June to date — around one-third of the 52 fixtures completed in May — with fewer than 20 confirmed by mid-May compared with more than 40 each in the two preceding months.
Vessel scarcity is likely to persist.
Houston-Chiba rates are being sustained largely by exporters with long-term product contracts in place rather than by spot demand for LPG, with US supply largely unprofitable in Asia-Pacific at the current price and freight rate.
Charterers have responded by swapping or delaying shipments and utilising vessels on long-term deals where available, and some traders have re-let vessels rather than use them for exports. The spot market has reached a stand-off, with remaining June cargoes likely to be fixed above the last-done level.
The Ras Tanura-Chiba rate also continued to rise on limited options for east of Suez fixtures, reflecting broader vessel scarcity across the market.
The underlying demand pull stems from the redirection of Asian LPG buying toward the US Gulf. Global seaborne LPG exports remain around 600,000 b/d below pre-war levels, sustaining the switch toward long-haul US Gulf loadings that has absorbed fleet capacity and compressed June availability.
Conditions in the Mideast Gulf remain uncertain and the timeline for any resumption of normal shipping operations is unclear. Further rate gains are possible while June cargoes remain uncovered, although charterer reluctance to engage above current levels may cap any further gains.
