High LPG terminal fees could hinder US LPG exports as arbitrages are narrow, said Knut Scharning, president of Gulf Stream Tanker Chartering.
“Terminal polices hold back trade development,” he said today at the Argus Americas LPG Summit in Houston, Texas. “If terminal fees in the US stay high then it will be more difficult for the arbitrage to develop in a more natural environment, and if there’s more participants in this market the LPG may flow better.”
At current prices, some long term contracts — which are Mont Belvieu propane plus a double-digit terminal fee in most cases — provide less incentive for term contract holders to move more propane into a thin arbitrage. Lower fees would help volumes, he said.
Shipowners are facing considerable pressure from lower freight costs and lower utilization given transits via the Panama Canal, he said.
“They don’t have much positive to say about the Panama Canal because it saves the charterers money and they make less money,” he said. “You have fewer ton miles that the ship owner is carrying and with a lot of ships that have been built lately, that is a very sensitive thing.”
Freight fell from $4mn pcm to $500,000 pcm over the past two years, he said.
“A lot of the owners are really struggling,” he added. “They are not making much money at all.”
Higher volumes of LPG exports, supported by low terminal fees in the US, would support throughput and bolster shipping activity, he said.
Source: ArgusPrevious Next
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