Weekly Gas Report - 22

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1 «Be not afraid of going slowly, be afraid only of standing still» Market Comments HIGHLIGHTS VLGC: Baltic Index under renewed pressure from relets Ammonia: Prices expected to soften Handy: More ships trading in petchems Coaster: Some shipping length in all regions VLGC Having seen consecutive weeks of low spot activity levels in the VLGC market, we are seeing market sentiment dropping rather quickly. A trader fixed out a relet this week at US$ 27 pmt for a Middle East Gulf to Asia voyage for mid-june loading, this a discount of about 10% to the Baltic Index set the day prior. More relets are being shown in the market for June dates in Middle East Gulf and we believe some are willing to consider close to same levels as last done on the Baltic Index route. The summer season normally will see more spot cargoes out of the Middle East and we will whether this will be the case also this year. The US Gulf to Asia arbitrage remains unattractive and we have seen little activity in the West market. With maintenance at the Enterprise terminal starting second half June, an unworkable arbitrage and a few cancellations of term contracts, we expect quite a significant decrease in export volumes in June compared to May. NH3 The international ammonia market saw few new transactions. The outlook for the coming months is on the bearish sides with more new production capacity coming onstream relative to expected demand. New production capacity will be added not only in the US and in Russia. East of Suez the new Maaden ammonia plant in Saudi Arabia will most likely export production for longer than earlier envisaged as its downstream phosphate facility is delayed until Although Asian ammonia demand is expected to pick up, this is unlikely to absorb all the new production capacity brought on stream. Ammonia exports out of the Baltic should increase substantially from the recent range of 40,000-70,000 tons per month when the new Acron plant starts exporting. The 500,00-550,000 ton per year plant could boost exports from the Baltic by over 40,000 tons per month. Handy The Western Handy Market continues to struggle with low utilization rates and large pressure on freight rates. Looking 6 to 12 months back a large percentage of the global fleet was trading in LPG, however since this market to a large extent collapsed as an effect of no arbitrage possibilities and consequently a huge drop in freight levels on the larger segments making it more economical to use larger ships for long haul trades, owners have been forced to look for employment in petrochemical trades. This is not necessarily bad for the Handy owners as the petrochemical markets continues to trade at a considerable premium to LPG. However, it remains to be seen if there is enough volume to be shipped for freight markets to improve any time soon. Coaster With few cargos quoted in North West Europe, Mediterranean and the Black Sea we have been experiencing a quiet week and consequently quite some shipping length on the pressurized Coasters. A continuation of this situation can cause a downward pressure on freight rates. That being said, as we have seen many times before, the European Coaster market can very quickly turn back up again. US$/month VLGC - Timecharter Equivalent (TCE) ytd Week no 1

2 LPG LPG: US prices easing relative to overseas In Europe LPG prices ended the week higher on renewed demand as well as firming crude and naphtha values towards the end of the week. However, the more balanced market could be short lived as only a few extra US cargoes could send prices lower. This is looking more likely as the NW Europe market continues to offer US sellers better netbacks relative to Asia. Following the recent price movements the arbitrage to Europe is slightly positive having been closed for several weeks. Butane has been firming moderately relative to propane as industrial action at four of France s eight refineries is starting to reduce the supply. In the Middle East, the June CP s were announced with propane and butane pegged at US$ 330 and 365 respectively. This was an increase of US$ 5 for propane and a reduction of US$ 15 for butane. Fob cargoes were offered but interest was limited as would be buyers were looking for larger discounts than sellers were ready to admit. In the Asian LPG market the sentiment was little changed from last week and prices ended the week slightly down. Chinese requirements are having an increasing role in pricing in the area as the country is now the largest importer globally and the fact that a high proportion of imports is bought in the spot market. Hence, the weakening Chinese wholesale market lately reflecting a seasonal downturn in the household market as well as high inventories at petchem producers are adding to the bearish sentiment in the area. In the US, propane prices recorded sizable declines following a build in inventories and higher availability for exports due to PDH plant maintenance. EIA reported a build in nationwide stocks of 1.25 mn bl to mn bl. In the US Gulf area inventories showed m moderate draw of 265,000 bl due to record high US export volumes during May. According to Waterborne LPG US exports totalled 2.66 million tons. However, it is thought that June and July levels will be lower with possible cancellations and maintenance work at the Enterprise terminal. Awilco LNG has entered into a binding agreement to sell its LNG carriers WilGas (125,000cbm, built 1984) and the WilEnergy (125,000cbm, built 1993). The ships are expected to be delivered to the new owner between August 15 and September 15. A 10% deposit has been paid by the undisclosed buyer. LNG Atlantic LNG, the only LNG producer at Trinidad & Tobago is suffering from gas supply shortages. The 14.8mtpa facility at Point Fortin saw production dropping almost 18% in the first quarter this year compared to the same period last year. The plant produces LNG from natural gas delivered from offshore fields north and east of Trinidad. Gas supply shortages have also reduced the island s production of ammonia, which is also produced from the same natural gas resources. Kinder Morgan, the largest energy infrasyructure company in North America, announced that its subsidiary Elba Liquefaction Company, has received FERC authorization for the Elba Island liquefaction project. The US$ 2 billion project is located on the existing Elba Iasland LNG terminal, near Savannah Georgia. The first of the ten liquefaction units are expected to start operations in second quarter 2018 and the remaining nine units before yearend The project is supported by a 20-year contract with Shell. Annual LNG export capacity will be about 2.5 million tons. 2

3 FIXTURES SPOT Vessel Built Cbm Qty Cargo Load Disch Laycan Rate US$ Charterer CONCORDE ' LPG MARCUS HOOK OPTS END JUNE/ELY JULY 33 BSS H/F SUNOCO KOBAI ' LPG RAS TANURA INDIA 15 JUNE 1.22 MILL LS BPCL PLANIMALAI GAS ' LPG MAA 2-3 PORTS INDIA JUNE 1.24 MILL LS IOC ASTOMOS TBN NA NA 44' LPG MEG EAST JUNE 27 BSS RT/CHIBA VITOL SAARGAS '6 BUT FREDERICIA OPTS 5-7 JUNE RNR STASCO EPIC CALEDONIA '8 BUT ROTTERDAM OPTS 6-8 JUNE RNR EXXON PERIOD Vessel Built Cbm Trade Delivery Period Hire US$ Charterer JENNY N LPG 2H JULY IN USG 3+3 MONTHS LOW/MID 600'S PCM PETREDEC RATES Baltic Exchange LPG Index 44 LPG Ras Tanura/Chiba Last Week This Week Trend Weekly Baltic average (US$/pmt) 30,45 28,94 Softening (US$/pcm) Softening Baltic TC Equivalent (US$/pd) Softening 12 months Time Charter - Indicators Last Week This Week This Week Trend (US$/pd) (US$/pd) (US$/pcm) cbm S/R Steady cbm P/R - East Steady cbm P/R - West Steady cbm P/R Steady cbm S/R Steady cbm ETH Steady cbm S/R Softening cbm Softening cbm Softening cbm Softening VALUATIONS We provide expertise valuations for a number of ship owning and banking clients worldwide, covering all types of gas carriers either on a regular basis (quarterly, semi-annually) or on an ad hoc basis. Our experienced team is fully updated on the latest secondhand and newbuilding price trends and maintain a comprehensive database with historical prices. We strive to maintain an unbiased approach to valuations, which are carried out in due diligence and in accordance with established ISO procedures. 3

4 PRODUCTS & PRICES LPG, Natgas, Crude, IFO380 Propane Change from Butane Change from US$/pmt last week US$/pmt last week NWE FOB ARA Small 339,0 100,0% 326,0 10,1% US Mt Belvieu Non-LST 252,3-10,8% 288,0-6,0% MEG Contract Price 330,0 1,4% 365,0-3,9% Japan CFR 338,0-3,3% 367,0-4,4% NG, Crude & IFO380 NG, NYMEX 2,42 11,46 % US$/mmbtu WTI, Light Crude - NYMEX 49,17 0,06 % US$/bbl IFO380, Fujairah 245,00-0,61 % US$/pmt Various Sources Name Office Mobile Yahoo Messenger Brokers Anders Lalim la_limno Katie Du katiemin1209 Sebastian Isaksen sebastian.isaksen Eirik Schøne Ness eirik.schone Henrik Konow Verlo hkverlo Research Knut Stangebye Olsen knutstangebyeolsen Operation Håvard Teigland havardteigland Spyros Bampetas spyrosbampetas Phone: Fax: lorgas@lorstem.no (+47) (+47) Lorentzen & Stemoco AS Munkedamsveien 45 8th floor, lift E PO Box 2029 Vika, N-0125 Oslo, Norway Disclaimer: The information contained within this report has been collected from a number of market sources and is given in good faith without guarantee, for information purposes only. Lorentzen & Stemoco and its affiliates, directors and employees are not liable or responsible for any consequences whatsoever occurring from errors or inaccuracy of the information contained within this report. 4

5 Office Oslo Address Lorentzen & Stemoco AS Munkedamsveien 45, 0250 Oslo P.O. Box 2029 Vika, 0125 Oslo Norway Athens Lorentzen & Stemoco (Athens) Ltd Leof. Karamanli 25 Voula Athens, Greece Singapore Lorentzen & Stemoco Singapore Pte Ltd. 8 Eu Tong Sen Street, #21-98 Office 1 The Central Singapore Shanghai Lorentzen & Stemoco Shanghai Representative Office Room 2701, Shanghai Central Plaza 381 Huai Hai Zhong Road, Shanghai China New York Lorentzen & Stemoco AS (New York City) 501 5th Avenue- Suite 1707 New York, NY United States of America +1(212) London Lorentzen & Stemoco UK LTD 5th Floor, Dacre House 19 Dacre Street. London SW1H 0DJ England Disclaimer: The information contained within this report has been collected from a number of market sources and is given in good faith without guarantee, for information purposes only. Lorentzen & Stemoco and its affiliates, directors and employees are not liable or responsible for any consequences whatsoever occurring from errors or inaccuracy of the information contained within this report. 5