VLGC shipowners are in line for the largest boost following the thawing of trade tensions between Donald Trump’s government and China, DNB Markets says.
VLGC giant BW LPG is one of three stocks which the Norwegian investment bank believes has the most to gain from the development.
Analyst Nicolay Dyvik says the probability of a trade deal has increased given the latest indications from both sides.
“LPG shippers would be the largest beneficiaries of a trade deal,” Dyvik said in a video to clients.
He explained trade tensions had slices US to China LPG shipments by 50% year-over-year.
This has dragged down VLGC utilization by more than 3% and been met by a drop of over one tenth on BW LPG’s market value, Dyvik said.
“We argue rates bottomed out in February and are set to increase into March and April,” he said.
“We argue [VLGC] rates this year will average $24,000 per day, next year $28,000 per day and in 2021 $36,000 per day.
"That will make 2019 the first in three years with rates above cash breakeven.”
The dry cargo and LNG markets are also expected to feel some positive response from the end to the tariff tit-for-tat.
Leading public players in each were singled out as the stocks most likely to pop in response.
“If a trade deal is reached Flex, BW LPG and Golden Ocean are set for strong rebounds,” Dyvik said.
