Middle East LPG Ship-to-Ship Transfers Outside Hormuz Rise in June

Middle East LPG producers increased ship-to-ship transfers outside the Strait of Hormuz in June to sustain cargo sales amid ongoing shipping risks, according to market participants.

The start of the Iran war in late February disrupted trade flows through the Strait, with buyers across the market shunning Middle East cargoes due to transit risk and turning instead to U.S. supplies as an alternative.

Vortexa data showed total Middle East LPG exports fell from 3.83 million metric tons in February to 2.08 million mt in March following the onset of the conflict, and have since continued to decline, remaining below 1 million mt in subsequent months. Prior to the conflict, exports were around 3.5 million mt to 4 million mt per month, the same data shows.

Sources said STS transfers have emerged as a way for Middle East producers to facilitate cargo movements to buyers and sustain sales amid continued concerns over shipping risks.

“By transferring cargoes outside the waterway, sellers take on the logistical burden and risk of moving supplies through the high-risk route. Buyers are more willing to take the cargoes once it is out of the Strait of Hormuz,” a trader said.

Shipbrokers said at least four STS transfers have been tracked so far in June, with three conducted by Kuwait Petroleum Corp. and one by Adnoc. All cargoes were heard destined for India.

One KPC-linked transfer took place on June 8–9, when the vessel Gas Umm Al Rowaisat transferred an LPG cargo to the Badrinath at Sikka, with the cargo bound for Paradip port.

KPC conducted another mid-June transfer, involving the Umm Laqhab vessel, at Sohar outside the Strait of Hormuz. Another end-June STS operation is expected, involving the Al Wukir vessel — also at Sohar, sources said.

Some traders also heard KPC may be looking at a fourth STS transfer, although this could not be confirmed.

Adnoc also conducted an STS operation using the time-chartered vessel Al Maryah, which loaded an LPG cargo from the Ruwais refinery on June 2 and completed a transfer at Sohar on June 7, analysts told OPIS, citing Kpler data.

Importers noted that this has also helped sustain buying interest, particularly among Indian buyers, who continue to seek additional cargoes amid tight supply.

Going forward, market participants expect the STS trend to taper off following the signing of a U.S.-Iran memorandum of understanding to end the conflict, which is expected to eventually lead to the reopening of the Strait of Hormuz and a normalisation of shipping flows.

—Reporting by Cheryl Lee, clee@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com