Weaker LPG arbitrages from the US are forcing some terminal operators to allow larger customers more leeway on cancellation windows
OREANDA-NEWS. Weaker LPG arbitrages from the US are forcing some terminal operators to allow larger customers more leeway on cancellation windows.
"I hear they are being much more lenient," one buyer observed.
The expansion of Enterprise Products Partners' 16mn bl per month terminal on the Houston Ship Channel late last year, coupled with Targa's 6mn bl per month terminal nearby and Sunoco's 6mn bl per month terminal in Nederland, Texas, mean US buyers no longer have to vie for terminal space. With the start of refrigerated VLGC loading from Sunoco's Marcus Hook terminal in Philadelphia earlier this year, and the impending commissioning of Phillips 66's Freeport, Texas terminal, the market will be increasingly competitive, giving long-term buyers more leverage in negotiating contracts.
Last month at least three VLGC cargoes out of the US Gulf coast were cancelled as the arbitrages between the US and other regions were too narrow, and freight costs too high, to make lifting the cargoes worthwhile, despite cancellation fees.
US in-well propane traded at a narrow $84/t discount to month 3 propane prices in Asia yesterday, sharply narrower than the $311/t discount US traders enjoyed a year ago. That has prompted some US terminal operators to allow customers more time to either resell the cargo or locate a vessel. Usually term contract holders must notify the terminal operator at least 30 days in advance of a cancellation, but now in a few cases extensions are granted.
"It may be a sign of better customer service in light of more competition," according to an observer.