VLGC spot rates have continued their staggering decline to fall below vessel operating expenses on some routes.
The Baltic Exchange assessed earnings at just $6,400 per day from the Middle East Gulf to Asia, down 29% in a day and 96% below the all-time high of more than $170,000 per day in September, when high US exports and Panama Canal congestion were driving rates.
Investor Joakim Hannisdahl of Gersemi Asset Management described Thursday as “terrible” for VLGCs.
He said earnings have now gone below vessel operating expenses of $8,000 per day in the case of leading shipowners Avance Gas and BW LPG.
US to Asia rates crashed 38%, although they were still above the Middle East at $12,900 per day.
Norwegian shipbroker Fearnleys said Asian charterers are in no rush to jump into the market just yet.
The Oslo shop added that more than 10 vessels could reach the Middle East for the February fixing window.
The broker believes there is a need to see ships being absorbed in the West, as well as more activity in the East.
Atlantic basin markets have been quiet, however, as the price differential between US and Asian gas continues to weaken arbitrage possibilities.
The freight market is still searching for a floor, argues Fearnley Securities, which does not see any short-term turnaround for the sector.
On Thursday, US-listed Dorian LPG said it had secured 60% of first-quarter VLGC days at rates of more than $100,000 per day, insulating earnings to some extent from the slump.
Rate pain to come
The rates pain should become visible in the second quarter if the downturn persists, analysts Oystein Vaagen and Fredrik Dybwad said.
Clarksons Securities blamed “unfavourable fundamentals” for the slide.
Data released this week by the Energy Information Agency showed that US propane and propylene stocks declined by 5.3m barrels to 62.6m barrels last week.
Cold weather in the US has supported domestic demand and has adversely affected the US to Asia price spread, the investment bank said.
Forward price assessments for February and March translate to VLGC earnings of $29,300 per day and $38,400 per day respectively, Clarksons Securities added.
