Freight rates for very large gas carrier (VLGC) shipments out of the US Gulf coast have climbed over the past two weeks to the highest levels since late December, largely on the back of a wider arbitrage to ship propane to Asia.
From 9-22 June, the Houston, Texas-to-Chiba, Japan, VLGC rate rose by 24pc to $179/metric tonne. The rate was up by 83pc since falling to a year-to-date low of $98/t on 30 March.
The jump in freight was supported by a substantial widening of the AFEI/LST paper arbitrage for July and August, which is the current fixing window for VLGCs in the Gulf.
On 21 June, August AFEI/LST paper traded at $209/t and July paper traded at $205-206/t, up from $182-184/t and $168/t, respectively, two weeks ago. May paper was trading at $131-132/t on 30 March, when freight was at a year-to-date low.
Canal delays tying up tonnage
Low water levels at the Gatun Lake have forced the Panama Canal to implement increasingly restrictive drafts over the past month. So far, the strain on vessel traffic has been minimal, but wait times started to rise this week.
Delays at the canal put upward pressure on VLGC freight rates by limiting tonnage replenishment in the Gulf and by delaying vessels sailing to Asia.
Yesterday, the northbound Neopanamax-lock wait time for a VLGC without a reservation was nine days, and the southbound wait time was six days, up from three and two, respectively, on 14 June.
At 12pm ET, 11 VLGCs were waiting to transit northbound through the canal into the Atlantic basin, and seven were waiting to transit southbound into the Pacific, per Vortexa data. When delays are low, there are generally fewer than five waiting in either direction.
