BW LPG chief executive Kristian Sorensen has spoken of a question mark hanging over the VLGC market due to an increasing orderbook for very large ammonia carriers.
Sorensen told an earnings call that the VLGC newbuilding slate has been a focus for the sector over the past few years.
But the pace of deliveries will slow sharply after the first quarter of 2023, Sorensen believes, with limited additions for the next 24 months.
“We do, however, monitor the large number of VLAC newbuilding orders this quarter for 2027 delivery, which may bring uncertainty to the development of the VLGC market in the longer term if the ammonia export projects do not materialise or are delayed,” Sorensen warned.
He explained that ammonia has for several decades been carried on board LPG vessels, with mid-size carriers currently the workhorses of this trade.
“These new VLAC newbuildings are essentially VLGCs which are ‘specced up’, with strengthened tank structures such that they can carry up to 98% ammonia,” Sorensen added.
“But they can also shift their trading to LPG if the ammonia trade is not as lucrative or attractive as expected. So these VLACs in theory can also trade LPG,” he said.
Sorensen said 73 gas ships capable of lifting ammonia are on order.
This includes VLGCs with the flexibility to move into ammonia trades.
Almost half of the newly minted VLAC orderbook is owned by companies new to the LPG shipping sector, according to Clarksons Research.
Researcher Oliver Stavrinidis said companies such as George Economou’s TMS Cardiff Gas and Evangelos Marinakis’ Capital Gas have been muscling in on a sector that saw its first order placed only last May.
LNG carrier power Nakilat and tanker pools player Maersk Tankers have also made their moves.
These four companies will control 14 VLACs between them on delivery.
The remaining 18 ships on order are owned by Idan Ofer’s Eastern Pacific Shipping, Greece’s Naftomar, Japanese giant NYK, PascoGas and Dorian LPG.
The ships represent 26% of the large LPG carrier orderbook.
