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Buyers of U.S. Cooking Gas Cancel Cargoes on Freight Costs
Asian Buyers of Liquefied Petroleum Gas Were Forced to Scramble After Hormuz Closure
Key Takeaways:
- Soaring shipping costs tied to the Middle East conflict are making U.S.-to-Asia LPG exports uneconomical, leading some buyers to cancel cargoes.
- With Persian Gulf flows constrained, countries like India have turned to U.S. supplies — but higher freight rates are driving up costs and limiting relief.
- Longer routes and Panama Canal delays are tying up vessels, tightening tanker availability and pushing shipping rates to multiyear highs.
Some buyers of U.S. liquefied petroleum gas canceled shipments that would typically be bound for Asia following a surge in freight rates sparked by the conflict in the Middle East.
At least two cargoes scheduled to load next month from export terminals on the U.S. Gulf Coast were canceled, and some buyers are in talks to terminate more shipments, according to people familiar with the matter. They asked not to be identified because they’re not authorized to speak to the media.
Asian LPG buyers were forced to scramble for more U.S. supplies after the Iran war led to the near-closure of the Strait of Hormuz, choking off flows from the Persian Gulf. A key marker for gauging profits from exporting U.S. gas to East Asia, known as the Far East Index-Mont Belvieu differential, has narrowed while shipping rates have jumped, wiping out healthy returns for traders.
India, a major importer that shipped 90% of its LPG from the Middle East prior to the war, turned to the U.S. to partially replace lost supply, but inflated shipping rates have driven up costs and squeezed the nation’s state refiners. For Asian buyers, there’s little relief from the freight surge.
A cargo shipped to Asia through the Panama Canal can either queue for much longer than it did before the war, or pay eye-watering sums to jump the line. The alternative is the route via the Cape of Good Hope, which ties up vessels for longer periods, adding to a tanker squeeze and pushing up rates.
LPG is widely used as a cooking gas in domestic and commercial kitchens across India, or to make plastics in large factories in China.
