LPG vessel orders grow, but spot charter rates flat for now

Rising demand has prompted owners to order more and larger LPG vessels, according to Drewry Maritime Research. LPG demand has been improved by a growing consumption base in emerging economies, with supply bolstered by an expected emergence of new export sources, notably the US and the Russia.

Drewry expects LPG demand in the so-called saturated markets, such as Japan and South Korea, to remain robust on the back of government support and increasing consumption in sectors other than residential. China has also been investing in propane dehydrogenation units, which could cause its imports to recover in the medium and long term.

These market expectations, from both the supply and demand side, have led ship owners to believe that medium and long-term tonne-mile demand could rise. Newbuilding activity has gained momentum in response, said Drewry.

Only five VLGCs orders occurred in 2010 and four in 2011, but there were 11 orders for VLGCs, aggregating more than 900,000 cu m, during 2012. The average vessel size has also grown, to 32,125 cu m last year from 15,179 cu m in 2010, on the back of the 11 VLGC orders.

Gibson Shipping Energy, meanwhile, saw spot charter rates for available VLGC as relatively flat, following recent sharp declines. Ex-dry dock vessels have been particularly difficult to book due to accessibility issues with some Japanese receivers. Discussion focused on the Atlantic, according to Gibson, with cargoes out of Houston being talked as far out as mid-April but first-half March discussion also still heard for ex-West Africa and Algeria volume.

FACTS Global Energy, Honolulu, has projected LPG exports from the US Gulf to approach 10 million tons/year by 2020, compared with 3.3 million tpy in 2011 (OGJ Online, Oct. 1, 2012). Latin America has so far received the bulk of LPG exports from the US, but as volumes grow FGE expects US producers to increasingly seek outlets in Europe and Asia.

Contact Christopher E. Smith at chriss@ogjonline.com.

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