Atlantic LNG: Charter rates extend gains

Spot charter rates in both basins continued to rise on Wednesday, as availability continues to tighten and firms are faced with greater sailing distances.

The Argus Round Voyage 2 (ARV2) rate — for tri-fuel diesel-electric (TFDE) carriers delivering from the US to northwest Europe — rose to $75,500/d on Wednesday from $72,100/d a day earlier and $56,000/d a week earlier. And the rate for US-northeast Asia journeys — ARV3 — also rose to $76,200/d from $73,100/d on Tuesday and $57,000/d on 21 April.

Prompt spot rates have been supported in recent weeks by the open inter-basin arbitrage, which is set to encourage flows from US and other Atlantic basin export regions into south and northeast Asian demand markets. The flows require many more sailing days than for delivery instead to Europe, leading northeast Asian buyers and firms seeking to sell Atlantic volumes on a des basis to seek additional carriers to meet the rise in their respective tonnage demands.

But delays at the Panama Canal earlier this month — in large part arising from increased transit demand from the containership segment — has led firms to instead deliver US volumes to northeast Asia via the Cape of Good Hope, which requires even more sailing days compared with delivery via Panama.

And despite most carriers that have loaded at US export projects in recent weeks appearing to be en route to leave the Atlantic basin via the Cape of Good Hope rather than via Panama, there have still been 4-5 laden carriers held north of the Panama Canal for southbound transit in recent days. Most of these have had to wait for a few days, with the exception of the 174,000m³ SCF Timmerman which was on its fifth day of waiting on Wednesday. This suggests that congestion at the canal remains, with few charterers willing to risk transit via Panama, lest they face delays similar to those seen last winter.

A slowdown in Indian gas demand could also extend sailing days, market participants noted on Wednesday, with some cargoes — primarily loaded in Qatar and the UAE — being diverted in recent days. India is one of the closest main demand markets for export projects in the Middle East, meaning that diversions to elsewhere would increase tonne mileage. And for carriers with US LNG heading to India via the Cape of Good Hope, any diversions from India on to other demand markets in northeast Asia would also further buoy tonnage demand during a period when availability has already tightened sharply.