Panama Canal expansion could cut transfers: EIA

OREANDA-NEWS. April 28, 2016. The Panama Canal expansion, expected to begin transits on 26 June, may significantly reduce the number of ship-to-ship LPG transfers, the US Energy Information Administration (EIA) said.

Because of the current inability of VLGCs to transit the canal, many shippers are shuttling smaller LGCs from the US across the canal, where they offload the cargo on another vessel for the trip to markets in Asia, thereby cutting down on transit times for both vessels. The EIA expects this may end once larger vessels are able to make the trip.

"US export data show increased propane exports to countries in the Caribbean and Central America where the ship-to-ship transfers are taking place, but these countries do not have sufficient domestic demand for — nor the infrastructure to store and distribute — such large quantities of propane," the agency noted

"The new, larger Panama Canal locks will allow the majority of VLGCs to transit, which will likely reduce or end the practice of ship-to-ship transfers of US propane destined for Asian markets."

However, market participants say high transit fees on the canal may not make it worth the trip, especially given lower VLGC freight costs now that new vessels are entering the global market. The estimated transit cost for a VLGC through the expanded canal is \\$195,700 for a vessel carrying more than 48,000t, and with only about four transit slots per day through the waterway, many operators may decide it's easier to take the longer route to Asia. Since the start of the year spot VLGC freight costs on a Houston-Chiba basis have fallen by nearly 50pc to \\$65/t.