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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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They're Predicting a 710% Rise in Prices Here

The next big boom in commodities might not be copper, gold, or even oil.

It could be a more obscure market. Natural gas liquids, or NGLs.

I discussed last week how European chemical makers are scrambling to secure supplies of cheap natgas liquids like ethane. Supplies that have been unlocked from America's booming shale gas production.

Last week we saw evidence that the NGLs craze isn't limited to European buyers.

Asia also wants to get in on the action.

At least according to investment bankers DBS Markets. Who released a report predicting a massive rise in demand for shipments of American NGLs eastward across the Pacific.

DBS believes the widening of the Panama Canal will be a major driver for increased U.S. shipments of NGLs to Asia. Starting in 2015, when this project is planned to be completed.

So great will be demand, that DBS expects freight rates for very large gas carriers (the vessel of choice for NGLs shipments) to explode. To as high as $300,000 per day. A full 710% higher than the current $37,000 day rate.

Even before 2015, the bank expects solid upward pressure on gas carrier rates. DBS has upped its forecast for 2013-15 prices by 40%. Expecting an average of $45,000 per day in 2014.

The big numbers being tossed around here speak to the scale of the U.S. NGLs opportunity. Few other commodities have the kind of arbitrage opportunity seen in this market. Where commodities like ethane are selling for almost nothing in America--and yet going for high prices in Asia and Europe.

Better yet, exporting NGLs like ethane, propane and butane doesn't require a sea change in infrastructure, the way liquefied natural gas (LNG) does. The big challenge for American NGLs producers is simply getting the substances to the coast for export. Once there, NGLs can easily be carried by the gas carriers already commonly landing in American ports.

Several pipeline projects are now underway to move NGLs from plays like the Marcellus and Eagle Ford for export. These may prove to some of the most lucrative opportunities on the market going forward.

Here's to the next 710%,

Dave Forest




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Leave a comment
  • A S on December 16 2013 said:
    1) VLGC rates are unlikely to get that high given the wave of newbuilds that will arrive in the 2015 -2017 time-frame.

    2) There is no market for ethane in Asia-Pacific.

    3) Exporting ethane does in fact require very expensive infrastructure similar to LNG. Although exporting propane is significantly cheaper than LNG, refrigeration and storage is still new infrastructure for the US.

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