Canadian propane tanker's cargo resold five times at sea as Asian buyers scramble for fuel
A large tanker carrying Canadian propane was resold to new buyers at least five times before it even reached its destination after leaving the B.C. coast last month — a sign of the scramble for fuel in Asia caused by the war in the Middle East.
While Canadian propane cargoes are occasionally resold while in transit, multiple trades of a single shipment are highly unusual. The cargo was bound for China when the conflict broke out and was bought and resold at least five times on the spot market — fetching a steep premium to the Asian propane benchmark, according to an industry report and a source familiar with the market.
“If you can’t get your (propane) supply from the Middle East because the Strait of Hormuz is blocked, you’ll be looking wherever you can find it elsewhere,” said Alex Munton, director of global gas research at energy analysis firm Rapidan Energy Group.
“It’s not just that prices are up; there’s also an incredible amount of volatility,” he said. “The value of that cargo is yo-yoing as it’s on the water and that creates opportunities and opportunistic trades as it’s making its way to its ultimate destination.”
Similar to liquefied natural gas (LNG), Canada’s propane exports are refrigerated or pressurized into liquid form and shipped in specialized tankers for the nine-to-11 day voyage to Asia. Most Canadian propane exports are sold under long-term contracts to buyers in countries such as Japan, China and South Korea, where the fuel is widely used for cooking and heating.
But some buyers who do not immediately need the supply will occasionally resell cargoes while they are still in transit in order to capitalize on rising prices in other markets.
Marine traffic data suggests the tanker carrying 600,000 barrels of propane from AltaGas Ltd.’s export terminal near Prince Rupert, B.C., departed Canada shortly before the Feb. 28 attack on Iran that shut a key shipping route for Middle East energy exports. The vessel arrived in China on Friday.
The fuel is sourced mainly in Alberta and northwestern B.C. as a byproduct of natural gas production and shipped by rail to the coast. Canada’s growing propane trade to Asia is increasingly viewed as an important part of Ottawa’s push to diversify energy exports beyond the United States.
At least two Canadian propane cargoes — including the shipment that changed hands five times while at sea — recently sold to Asian buyers at premiums of US$100 to US$170 per tonne above benchmark prices, according to price-reporting agency Argus.
The unusual trading activity suggests Asian buyers may be scrambling for supply outside of the Middle East, market watchers say.
Asian markets in particular are facing an acute shortage of propane, butane, diesel and jet fuel, as vessel traffic through the Strait of Hormuz has slowed to a trickle amid fighting in the region, analysts warn.
“It’s the largest energy disruption the world has ever seen,” Munton said.
Analysts and industry participants say Canada has little ability or capacity to expand energy exports in the near term to help ease the looming global supply shortage.
Still, the country’s small but growing propane export industry is expected to benefit from higher prices.
AltaGas is currently building the first phase of a new export terminal near Prince Rupert that will add an initial 55,000 barrels per day of propane and butane export capacity by the end of 2026.
• Email: mpotkins@postmedia.com