VLGC owners have seen rates take a hit as trading opportunities dwindled between the US and Asia.
The Baltic Exchange’s VLGC index from the Middle East Gulf to Asia dipped to $84.30 per tonne on Friday, or $44,050 in daily rate terms.
This is down 9% from the previous day and 19% down over the last month.
Rates from Houston in the US to Chiba in Japan dropped to $40,550 per day, also down 9% in a day.
Clarksons Research called this a “sharp correction” on the back of a dearth of activity amid a narrowing US to Asia arbitrage.
It assessed US to Japan spot rates at $44,724 per day, down 19% over the last week.
Fearnley Securities said the sector has continued to face downward pressure.
According to shipbrokers, a few charterers had been in the market to test ideas, only to pull back later in expectation of the market falling further.
“However, after a few Indian cargoes coming into play and potential cargoes from outside regions, freight has seemingly stabilised for now for late-June liftings,” Fearnleys said.
Too many ships?
But looking further ahead, the position list in the Middle East looks “slightly lengthy”, it added.
Clarksons Platou Securities said rates in the West peaked after high activity in the Middle East pushed rates up in both basins, and “people started wondering if rates in the West were sustainable with an arbitrage already too narrow.”
The investment bank added: “The arbitrage has narrowed further, and brokers note that even though rates have corrected heavily, rates need to come further down before cargoes in the West start moving again.”
Rates are likely to weaken a little unless there is a boost to export volumes.
But even rates around $40,000 per day are fairly healthy in historic terms.
In the west, the market has been a lot more stable than its eastern counterpart.
Brokers have noted six liftings so far in June from the US Gulf and US east coast, bound for northern Europe.
This is quite high, given the average in the past three months has been 11 loadings.
For July, only six spot fixtures have been concluded, meaning there is plenty more activity to come.
At the end of May, VLGC rates had spiked past $70,000 per day as Middle East exports boosted vessel demand.
This was the highest number since 2021, with observers saying the market was “on fire”.
