LPG trade sees little impact from Suez Canal blockage

New York — Only a handful of Very Large Gas Carriers transit the Suez Canal carrying LPG from North Africa, North West Europe and the US to Asia, largely relying instead on the Panama Canal, Persian Gulf and Cape of Good Hope to move cargoes, limiting the impact of the stranded container ship blocking the waterway, trade and shipping sources said March 26.

"We have tried tracking vessels to see which ones are 'stuck' in Suez and it seems not too many," a shipping source said, when asked about the number of Mediterranean and European cargoes coming to Asia.

Japan's Shoei Kisen Kaisha, owner of the giant container ship Ever Given stuck in the shallows of the Suez Canal, said March 26 that efforts to move it overnight have not yielded any improvement and works were due to resume around 0500 GMT. (UPDATE: Japan's Shoei Kisen aims to refloat Ever Given at Suez Canal by night of Mar 27)

"From Algeria, probably only one cargo a month comes to Asia; Northwest European cargoes to Asia are also minimal," a North Asian trade source said.

Another trader said: "I heard vessels going through the Suez route from the US to India, VLGCs are using the Suez, so, maybe such vessels may be impacted. But the number of vessels using such route is limited, so the impact itself is not so big, I feel."

Kpler Research said in a report that only two LPG carriers were either waiting or approaching the canal as of early March 17.

Leth shipping agency reported that two LPG vessels and two chemical tankers were at the Suez Canal Anchorage, while five chemical tankers were in Egypt's Port Said Anchorage.

Five LPG ships are waiting to transit in the Great Bitter Lake, connecting the Mediterranean Sea and the Red Sea via the Suez Canal, according to Leth.

The shipping source added there might be one or two VLGCs and "potentially more to come as some discharge into Egypt, plus Saudi Yanbu cargoes do have loadings as well, but I'm not sure how much effect this will have."

He said LPG owners do not usually go via the Suez for US lifting, "unless you are in a hurry and need to get back, which don't seem to be the case today."

Mediterranean to Asia flow limited

Gibson shipping brokerage said two VLGCs were currently mid-transit in the Suez and another was approaching from the Mediterranean.

"While the Suez Canal is a key waterway for container flow, and to a lesser extent for crude oil trade, the impact of an extended congestion to the LPG shipping market should remain limited, as LPG traffic in the Suez Canal has been low, and dwarfed by the Panama Canal," Gibson said in a report dated March 25.

LPG transits via the Suez Canal fell in the second half of last year before rebounding in first quarter of 2021 with a surge of US cargoes, Gibson said.

Algerian exports to China, which jumped in Q2 2020, retreated the following quarter, while Northwest European cargoes have almost dried up since Q3 last year, Gibson added.

Chinese customs data showed that 112,260 mt of LPG was shipped from Algeria to China in May 2020, up from 44,437 mt in May 2019, with no such shipments recorded since.

China's LPG imports from the US totaled 733,385 mt in May 2020, up from none the year before, customs data showed.

China imported 850,027 mt of US LPG in February versus none in the same month a year earlier, and up 22.3% on the month, marking a new high in US inflows on a monthly basis, latest data showed.

This followed China's resumption of US imports since March 2020 after a lull of nearly 18 months due to trade tensions. It was not known how much of these imports transit the Suez Canal.

Shipping and trade sources also did not expect the Suez blockage to have too much impact on the already rebounding VLGC market, unless the situation escalates.

VLGC rates on the key Middle East-Japan route have been climbing since hitting a nine-month lows at $27/mt on March 8 to stand near $40/mt March 26, S&P Global Platts data showed, driven by the resumption of US loadings after winter disruptions and busier Middle East-India activity countering a number of trader relets.