Record US LPG exports in November combined with congestion at the Panama Canal, related delays and re-routings are leading to a wave of LPG reaching Asian and European shores in December. These arrivals are welcome as LPG enjoys some seasonal heating demand, which as well as other uses including petchem operations is largely isolated from the Covid-19 fallouts on the different markets. In combination with some easing in pricing, potentially continued high outflows from the US and some other markets should easily find homes.

Delays at Panama Canal averaged 13 days throughout November for unbooked vessels heading south on the Neopanamax locks. As a consequence, quite a lot of vessels towards Asia got delayed, while higher than usual volumes were sent to Europe, probably to avoid the congestion. As a result, LPG on the water (VLGCs only)  has once again reached a new peak this year averaging 68mb in November, with even higher levels hit over the last two weeks. The increase can be largely attributed to barrels that departed from North America, mainly the United States. These barrels account now for 67% of all flows on VLGCs, up from 50% three years ago.

LPG in transit on VLGCs by origin (mb)

LPG departures from the US destined for Europe increased significantly in the third week of November, amid the increased delays at the Panama Canal. Exports increased from 170kbd on average before in 2021 to close to 600kbd in the week Nov 15-21, and averaged a still healthy 230kbd since then. Arrivals in Europe are set to spike in the current week until Dec 12.

US weekly LPG exports to Europe; (M-S, kbd)

Asia is also set for a peak in December arrivals of LPG, coming right in time to meet peak winter demand. Due to the delays of US cargoes, November experienced one of the lowest import levels in recent years at below 1.9mbd, with declines particularly pronounced into China and South Korea.

LPG arrivals in Asia by destination country; (mbd)

Looking forward, the question is whether the US can extend the export levels reached in November. US propane stocks remain about 20% below last year but production and consumption of LPG in the US remain balanced which should allow further exports at similar rates. Spot freight rates from the US to Chiba have begun to soften from 23 November, decreasing nearly 10% to date. Additionally, Mont Belvieu prices for propane have also softened, allowing the arb to the East to remain open. So everything appears to be set for continued strong exports from the United States, especially towards Asia.

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