DNB Markets has upgraded the LPG sector suggesting the market is unlikely to fall apart.
Analysts at the Norwegian finance house believe the sell-off in VLGC owners stocks has been overcooked and rates are likely to spike this summer.
Nicolay Dyvik, OIyvind Berle and Petter Haugen upgraded the sector to buy on Wednesday evening suggesting the market remains tight and an immediate rebound in rates is possible as the summer season approaches.
The analysts argue tonne-mile growth of 20% is expected in 2016 driven by US to Asia shipments.
While fleet growth with overtake demand expansion in 2017 the opposite will be true in 2018, the report said.
Selloff too strong
VLGC owners’ stocks have retreated in a weakening market this year. But DNB argues the prices look exaggerated with spot rates in 2017 and 2018 forecast to remain above cash breakeven levels.
Spot rates this year are forecast to average $33,000 per day, down from the $50,000 previously projected.
For the following two years, spot earnings of $30,000 and $35,000 daily are forecast by DNB Markets, the report said
It has a buy rating on Aurora LPG, Dorian, Avance Gas and BW LPG, suggesting an average of 25% upside to the equities.
