Iran's Petrochemical Commercial Co is expected to offer more LPG to Asia after selling a cargo to South Korea, possibly its first to this region in 2013 since an EU ban late last year, by using ships made available for CFR deliveries, industry sources said this week.
If PCC managed to continue selling, it will mark Iran's return as a regular exporter to the international market following sanctions imposed on its oil and gas exports last year due to its disputed nuclear program, which remain in force.
This would help to boost LPG supplies and moderate prices in Asia, after concerns over a lack of Iranian tons prompted North Asian lifters to increase contracted volumes with other Middle Eastern producers, as well as seal deals with US suppliers to capitalize on a rise in shale-gas based LPG output, sources said.
The main buyers of Iranian LPG are expected to be from South Korea, traders said. However, major Asian buyer Japan prefers to take term or spot LPG from producers such as Saudi Aramco and Qatar's Tasweeq -- with whom they have raised contracted volumes for 2013 -- as well as from the US, traders added.
"PCC may issue more tenders in coming months. It wants to make a try with the recent tender to prove to the market that its prices are not lagging others," one source familiar with the matter said, adding that offers would also be made via private negotiations. PCC's Bandar Imam Petrochemical Complex is now operating at a high rate, the source added.
PCC, Iran's top exporter of petrochemical products, last week sold via a spot tender a cargo comprising 33,000 mt of refrigerated propane and 11,000 mt butane to E1 Corp. for May 15-25 loading, a source close to the deal said.
The tender was awarded at a premium in the high $40s/mt to the Saudi June Contract Prices for propane and butane, CFR basis, other traders said.
"I think it's close to where the current market is," the first source said.
Some traders said Iran's monthly exports to Asia could be limited to two to three cargoes, as it relies largely on vessels that are able to load from Iranian ports. "So the impact should be limited," one market source said.
But a North Asian trader said up to four to five Iranian cargoes per month could be sold on CFR basis in the near future, which would almost match the average volumes seen last year. "Buyers will be [South] Koreans," he said.
The emergence of the Iran cargo brought some relief to the Asian market last week, easing Asian prices to around one-week lows, after initial concerns over a lack of spot cargoes from Saudi Aramco and Tasweeq had prompted a brief rebound earlier that week.
The market is also eased by news that Middle Eastern producers have raised term export volumes to North Asian buyers for 2013, while some traders are re-selling and offering their term cargoes. However, prices edged back up this week on resurgent buying interest, traders said.
On Wednesday, prices of propane and butane cargoes for delivery along the major Singapore-Japan route were assessed at $790/mt and $830/mt, respectively, down from this year's high of $1,009/mt and $1,006/mt, respectively, as assessed on February 15, Platts data shows. Compared with the same time last year, propane was $58/mt higher, though butane was down $2/mt.
IRAN MAY ACCESS SHIPS WITH ITS OWN INSURANCE COVER OR ACQUIRE VESSELS
PCC's cargo sold last week was the first export sale via tender since September 2012, when the Iranian company also sold to E1.
Before the sanctions, the Iranian petrochemical producer had exported via tenders or private negotiations, at least 380,000 mt in seven mixed refrigerated LPG cargoes for loading in May last year, around 220,000 mt for July, and at least 132,000 mt for August. The loading ports were Bandar Imam Khomeini or Assaluyeh.
Shippers and traders said PCC's latest CFR shipment might indicate that some ship owners are willing to charter out their tankers to deliver cargoes to Iran's LPG customers.
One shipper said Iran might have issued protection and indemnity insurance cover, commonly known as P&I insurance, for the ships loading in Iran now. "There are three ships, I think, so far," he said.
Since the EU sanctions first came into effect last July has banned the provision of insurance for oil tankers by EU-based insurance and re-insurance companies for moving Iranian oil cargoes, Tehran has been using its own vessels or time-chartered ships to export crude and fuel oil.
The tankers owned or time-chartered by Iran have been provided with P&I cover offered by Iranian insurance companies. Currently all the tankers under Iranian shipping company NITC delivering crude to Tehran's customers in Asia and the Mediterranean have been insured by the homegrown Kish P&I Club.
According to Iranian P&I Club's website, it offers between $500,000 and $1 billion of cover, with reinsurance covered by a consortium of Iranian insurers headed by state-owned Central Insurance of Iran, which was established in 1971 in parliament.
Shipping sources also said there have been instances of some shipowners willing to load out of Iran for a premium. The sources added that since shipowners are not mandated to declare load ports of every voyage the vessel undertakes, some are tempted to take a one-off Iran cargo on hopes of not getting reported.
Some sources said that Dubai-based companies might have also acquired old VLGCs which will allow CFR shipments of Iranian LPG, though this could not be immediately confirmed. Three VLGCs -- whose built years are 1987, 1990 and 1993, respectively -- have been acquired to deliver Iranian LPG cargoes on a CFR basis, sources said.
Trade and shipping sources had said in January that a UAE-based company was looking to buy a 45,000-50,000 cubic meter vessel of about 15 years old, and four 78,000-82,000 cu m tankers of less than 25 years old.
After the EU sanctions on natural gas exports from Iran were included under tightened trade curbs announced last October, most importers in Asia and trading firms have avoided imports from the Middle Eastern producer, even though LPG was not explicitly mentioned at that time.
But propane and butane had since been included in an annex to the EU Council Regulation of December 21, 2012, concerning restrictive measures against Iran. In its "frequently asked questions" document issued late January, the International Group of P&I Clubs, an association of major marine insurance providers, clarified that propane and butane are included under the EU ban on natural gas trade from Iran.
