In International Shipping News 27/05/2015
Rates for very large gas carriers are expected to stay volatile and strong through 2015 even though up to 37 ships are slated for delivery this year, as a surge in long-haul US LPG exports and persistent congestion at Indian ports absorb the new vessels, ship brokers said.
More than 40 VLGCs are expected in 2016, when freight rates may start to ease by the first half, they said.
“In the first four months of 2015 we have seen increased volatility in the LPG spot market continuing, including a short recovery in late February,” shipping brokerage Banchero Costa Research said in a recent report.
VLGC rates on the key Persian Gulf-to-Japan route have continued to rise to around $110/mt in recent days. The shortage of vessels had sent the Baltic index to a record of $143/mt in July 2014, while rates in the first four months of this year have averaged $88/mt, versus $73/mt in the same period last year.
“Timecharter rates of VLGCs have continued to increase, reflecting the improving market. On the other hand, timecharter rates for smaller units have remained under pressure,” it added.
The brokerage said that 23 vessels of all sizes were delivered in the first four months of 2015, for a total of 800,000 cubic meters, including seven VLGCs, or vessels of more than 70,000 cu m.
Banchero Costa expects 37 VLGCs — or a total capacity of 3.1 million cu m — to be delivered this year, leading to a 23% fleet growth in capacity terms.
Another 45 VLGCs, or 3.8 million cu m, are expected next year for an additional 22% fleet growth. As of May 2015, the brokerage estimated 170 VLGCs aged from up to four years to 30 years serving the market.
Another shipping broker said that out of the seven VLGCs due for delivery in the first four months, one vessel — the 53,800-dwt Monsoon built at China’s Jiangnan Changxing shipyard and owned by Frontline Ltd. — is now expected by end-June.
The second broker estimated the number of VLGCs due for delivery this year to be in the high 20s, rather than 37, due to potential delays.
Deliveries for 2016 are expected in the high 40s, and potentially another 15-18 in 2017, he said.
“I think this year it [rates] will stay high on the volatile side. It will start to be interesting in Q1/Q2 2016,” he said.
“More US cargoes are expected from the fourth quarter hitting the market. And some ships are delayed from the yard. It takes some time before all the ships actually enter the market.”
SURGE IN US LPG EXPORTS IN 2015
Traders and shipping sources said that arbitrage LPG flows from the US Gulf and Atlantic Basin to Asia in June are estimated above 850,000 mt, or almost 20 cargoes, up from around 600,000 mt in June last year.
About 433,000 b/d of new export terminal capacity is expected to come on stream in the US by the end of this year and 2016, including Enterprise Products Partners’ 233,000 b/d expansion three project in Texas, Sunoco Logistics’ 40,000 b/d expansion one project and the 160,000 b/d expansion two project, both at Marcus Hook, Pennsylvania.
Overall, almost 1.5 million b/d of export terminal capacity is expected in the US by 2018, though the volume of exports are estimated around 900,000 b/d, according to Bentek Energy, a Platts unit.
“We believe another 10 cargoes could be expected per month for export from Enterprise,” the broker said.
“About 7 million mt of extra volumes per year can be expected from Enterprise. It’s massive.”
Shipping sources said that while long-haul trips would tie up vessels, congestion at Indian ports are also exacerbated by increased term imports from the Middle East by state-owned companies due to recent falls in LPG prices.
Indian companies plan to import up to 8.9 million mt of LPG in fiscal 2015-2016 (April-March), an 11% rise from the previous fiscal year, sources familiar with the matter said.
In the first four months this year, India’s LPG demand rose 8.2% from the year-ago period to 6.22 million mt, government data showed.
Banchero Costa said overall deliveries of all LPG vessel types are expected to reach 4.0 million cu m this year, a modest 5% fleet growth in capacity.
But it expects about 5.5 million cu m of deliveries in 2016, or a fleet growth of 16%.
It noted that ordering has slowed down.
In the first four months of this year, there were 13 orders placed for a total 700,000 cu m of all vessel types, compared to 2.6 million cu m in the same period last year.
