-Global LPG market to see supply concerns in 2024-

In the global LPG market in 2024, several supply concerns persist. Firstly, the Panama Canal continued restrictions to pass through the canal. The Panama Canal imposed the restrictions from the end of July after a historical drought last summer. More players are expected to choose routes via the Suez Canal and the Cape of Good Hope rather than the Panama Canal. Arrivals of vessels with cargoes of US origin are predicted to be significantly delayed in the Far East. If the delay occurs when demand grows in winter in the Far East and Chinese players procure cargoes around the Lunar New Year holidays, the CFR Far East market might skyrocket.

The restrictions to pass the Panama Canal are affecting the freight market for VLGC (Very Large Gas Carrier), which resulted in a surge in the rates in 2023. While waiting time at the Panama Canal increased because of the tighter restrictions, the number of vessels using the routes via the Suez Canal was gradually rising. As a result, voyage days overall increased and supply of vessels tightened. The restrictions might be implemented up until around May at the beginning of a rainy season around the Panama Canal. Thus, the freight market is anticipated to hover high. As some players are cancelling taking in term cargoes from the US owing to high freight costs from December 2023 loading, supply to the Far East might further tighten in the future.

Supply concerns are also growing over supply of Middle Eastern cargoes. Middle Eastern oil producers agreed to implement voluntary production cuts during January to March 2024 in addition to coordinated production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC, or OPEC plus. Further, some gas producers in the Middle East planned to carry out turnaround from January. Yanbu terminal of Saudi Aramco, Mina Al Amadi gas plant of Kuwait Petroleum Corp (KPC) and Ruwais terminal of ADNOC would undergo regular maintenance from the end of January to early March, from January to March and from February to March, respectively. Because of the production cuts and the turnaround, LPG supply from the Middle East is expected to decrease during January to March.

Meanwhile, as of December 2023, many market players reckoned that supply/demand fundamentals were loose in the CFR Far East market. Along with restrictions to pass through the Panama Canal, supply of cargoes from the US is predicted to decrease and freight costs have risen, which sent the CFR Far East market higher. In this situation, profitability of propane dehydrogenation (PDH) plants and petrochemical companies deteriorated in China. Operation rates of PDH plants were lowered and start-up of new plants was postponed. As the management situation might not change and propane demand from China might not grow in 2024 either, some market players perceived that supply/demand might not necessarily tighten despite growing concerns about supply.

The Japan domestic market would face so-called "2024 issue" because regulations on working hours by truck drivers would be introduced in 2024. In the LPG industry, transporting companies have apparently announced since summer in 2023 that they would raise shipping fee in FY 2024. Whether the price hike would pass on to wholesale prices would draw attention in the Japan market.