US LPG entrenches itself as regular supply source to India: traders
LPG is being shipped to India from the US in November, making it a regular supplier to Asia’s second-largest importer since flows began in April, as traders widen sources to meet spot or term commitments after the attacks on Saudi Arabia’s oil facilities in September disrupted supply, market sources said.
In contrast, as trade tensions persisted, China continues to diversify away from US LPG, taking more from the North Sea, traders said.
Up to five VLGCs are on their way to India and China, from the US and North Sea, sources said. The buyers are state-run Bharat Petroleum Corp. Ltd. and Indian Oil Corp.
“Anything is possible. Indian buyers have done spot tenders on a CFR basis and it’s up to the sellers to source the cargoes from the Arabian Gulf, the US or anywhere else,” a source familiar with the matter said.
Among the traders moving Western cargoes to India are Equinor and Trafigura, who have term contracts with Indian buyers, market sources said.
The VLGCs include Crystal Sunrise, which sailed from Houston on October 13, and due to reach Dahej on India’s west coast on November 21, according to cFlow, Platts trade flow software.
Others include Sakura Gas and Pampero, both carrying US cargoes and heading to India in November, a Western trader said. Pampero is an Avance vessel fixed on spot basis to Equinor, a ship broker said. It is currently in the Caribbeans and due to arrive in Dahej November 22, cFlow showed.
The trader said Equinor is working on bringing one more Western cargo to India in November.
The Breeze is China-bound with a North Sea cargo, the trader added. It is currently in the Mediterranean, cFlow showed.
“Breeze is an Avance vessel fixed to Equinor on spot business duty. That one goes to China as she is loaded with full propane in Norway,” the ship broker said.
VLGCS LOADING MORE BUTANE THAN NORMAL
BW Gemini also loaded in North West Europe and could head for India, the ship broker said. It is en route to Egypt’s Port Said after departing Denmark, cFlow showed.
“Until vessels load and sail, as you know, there is no certainty where they will end up. I believe up to September from early this year, India probably has imported from the US about 500,000 mt,” another ship broker said.
He said there are delays at Indian ports and until Saudi Arabia sort things out after the production disruptions, some of the proposed Western shipments would not be finalized.
Some of the VLGCs were loading more butane than normal, a US-based source said. “Sometimes instead of loading all propane, they will load one tank of butane, but we have seen some in the past month or so, loading up to two tanks of butane,” he said.
“In September and October we see 25%-30% of all LPG exported from the US being butane. At the very start of the year it was 15%-17%, then around 20% during summer,” he said, adding that the butane arbitrage to Asia has widened despite rising freight costs, on worries about Saudi production constraints which lifted Asian prices.
VLGC moves to North America and Europe for long journeys to Asia have boosted global freight, with Persian Gulf-Japan rates at more than four-year highs of around $81/mt. Houston-Japan rates are at the highest in close to four years at $125/mt.
Platts assessed CFR Japan propane at $435/mt Wednesday, after hitting a five-month high of $456/mt on October 11, while CFR Japan butane was assessed at $453/mt after hitting a six-month high of $473/mt on October 11.
Since flipping to a premium against propane in early August, butane has been $8/mt and $20/mt above propane, Platts data show.
BPCL and IOC turned to buying evenly split cargoes via spot tenders for October and November deliveries after their October-loading Saudi term cargoes were delayed or deferred after the attacks.
Indian lifters are waiting for the acceptances of November-lifting nominations — expected by end-week — before deciding on alternative supply for the end-year, a source said.
Industry sources said the incident at Saudi Aramco’s 305,000 b/d SASREF refinery during a turnaround, added to uncertainties, though there were no reports of supply disruption as maintenance continues. Sources said even if LPG from the refinery is affected, the volume is small and meant for the domestic retail market.
India’s first lifting of US cargoes early this year was prompted by pre-election stockpiling in April and May. China’s rising imports of Middle Eastern LPG as the country halted US shipments, led to higher costs for Indian buyers, forcing them to seek cheaper alternatives.
India traditionally sources about 98% of LPG from the Middle East, comprising 45% propane and 55% butane, market sources said.