July 28, 2016 [OPIS] - As OPIS Asia staff reported previously, there has been an increase in floating storage for LPG from the trading houses, apparently intent on delaying their sale of their August cargo into September.
The August-September contango market structure has been relatively steady at around $7-8/mt over the past week, an incentive for such delay, with trading houses using their vessels to act as floating storage at around $15,000-16,000 per day.
“Importers in Japan, Korea, Taiwan and China are having high inventory, and demand won’t be high till December-ish … market is very slow now,” commented one source. Another source, however, reckoned there would still be demand from the Chinese importers, but it would be a buyers’ market and bargaining power would be on their side, pointing to several importers with buying interests even for August delivery.
Trading houses were, however, active in the trading window because they have shorts and obligations for swap deals, it is not actual demand, and market is not going to see much improvement till later fourth quarter, added another source.
“The whole market is flooded, you see the floating storage at Singapore.” While the spillover effect of August-delivery cargoes into the September market is likely to cause the supply glut to swell, the lower arbitrage inflow into the Far East has underpinned the market.
