More Old-School Logistics: "Long route to Asia may be the best bet for US LNG exporters in weak market"

Following up on the story* of CMA CGM avoiding the Suez Canal and sailing around Africa to sop up some capacity (and avoid the half-mil transit fee).
Now with added natural gas contango.

From S&P Global Platts:

• Highlights
• Average voyage length rises three days year over year
• Panama Canal expects fewer transits in coming weeks

Houston — The most curious aspect of two tankers' current voyage from US Gulf Coast LNG terminals may not be whether their cargoes land in China or somewhere in between -- but, rather, the route they are taking to get there.

Heading East toward the Cape of Good Hope, the Total-chartered SK Resolute and Naturgy-chartered Hoegh Giant have avoided the much shorter but pricey passage through the Panama Canal and the currently discounted passage through the Suez Canal. If they eventually unload in East Asia, they will have taken more than a month to get there.

Ultra-low international spot prices are forcing offtakers from the US to scrape the barrel for premiums, and that means staying on the water longer in hopes of getting a higher netback in the future. Voyage length for tankers from the US Gulf Coast to East Asia is averaging three more days than during the same period a year ago, S&P Global Platts Analytics data showed.

"It essentially becomes floating storage," said Michael Webber, managing partner of investment research firm Webber Research & Advisory. "If the spot pricing is weak and there is contango in the curve, depending on how the pricing is structured, maybe you want to take the time getting there."

Taking the eastbound route rather than westbound route to Asia should take nine to 13 days longer, depending on whether the tankers go around Africa or through the Middle East. Tanker day rates have dropped by half from the beginning of the year to $48,000 as of this week, and charters can often lock in better rates.

If booked a month ago -- the lengthiest voyage would have cost an extra 22 cents/MMBtu, Platts Analytics data showed. Weak LNG prices due to lower than expected demand, exacerbated by the coronavirus pandemic, means offtakers from the US are willing to absorb the extra cost and the boil-off from the longer voyage. Since January, the voyage length from the Gulf Coast to Asia has been getting consistently longer -- growing 11.4% year over year, or over three days, Platts Analytics data showed....

.....MUCH MORE

*Old School Logistics: CMA CGM Takes the Long Way Around