Houston—The number of long-haul LNG tanker voyages from the US Gulf Coast to East Asia around the Cape of Good Hope has begun to decline at the start of 2021, amid easing Panama Canal constraints and prohibitive incremental shipping costs, S&P Global Platts Analytics data showed.
The slow-steaming was common last spring and summer when ultra-low end-user prices were keeping tankers on the water longer in search of the best netback.Prices for spot-delivered cargoes into Northeast Asia, while off their record highs in January, remain strong enough to incentivize near-full utilization of US liquefaction facilities. The Platts JKM for March was assessed Feb. 8 at $7.615/MMBtu, more than four times the record low of $1.825/MMBtu on April 28, 2020, at a time when there were an average of twice as many LNG voyages via the Cape of Good Hope versus the current month.
" The arb window for USG–Asia February remains open, but Europe has emerged as the preferred discharge for US cargoes with the USG–Europe margins slightly wider by comparison," Michael Webber, managing partner of investment research firm Webber Research & Advisory, said in a recent note to clients. "This could potentially result in lower ton-mile and greater vessel availability."
LNG tankers transiting around the southern horn of Africa–the Cape of Good Hope–have dropped back to seasonal normal levels, with an average of two vessels making the voyage every five days in February so far. It was four vessels every five days in April 2020 when JKM hit its record low, and as high as more than one vessel a day as recently as November 2020, Platts Analytics data showed.
In 2020, LNG voyages around the Cape were elevated above the four-year range during much of the year. However, as the global shipping market has tightened along with a strong pick-up in Asian winter demand, the cost to take an LNG cargo along this route has become prohibitively expensive and fewer tankers appear to be willing to absorb this incremental cost, which may effectively force some Atlantic supplies to remain within the basin.
Asia LNG storage filling will likely keep some US LNG cargoes pointed towards Asia this spring, though the forward European netback is now strongly pointed to a premium in late-March and April. More US cargoes remaining in the Atlantic Basin this spring would be a turnabout from January, when imports of LNG into Europe's liquid trading hubs slumped to their lowest level in nearly three years.
Transits recordA new monthly record was set in January for LNG tanker transits of the Panama Canal as US shipments to Asia surged, according to the operator of the Canal. Fifty-eight LNG vessels transited through the Neopanamax Locks last month, breaking the previous monthly record of 54 transits in January 2020, the Panama Canal Authority said.
The Cape of Good Hope and Suez will generally see increased activity in shoulder periods as charterers take advantage of the contango in the curve.
While the Suez route is faster than rounding the Cape, the Suez has the advantage of greater optionality as it passes by 80% of the world's LNG demand on the way to the Japan-South Korea region.
The Pacific LNG shipping rate fell to a year-to-date low of $50,000/day on Feb. 5 amid high vessel availability, while the Atlantic LNG shipping rate was $95,000/day. The Atlantic shipping rate decreased to $88,000/day on Feb. 8.
