Norway’s Gersemi Asset Management (GAM) believes a buoyant large gas carrier market has the potential to hit huge new highs this year.
Joakim Hannisdahl’s investment fund argues the pricing differential inherent in moving gas from the US to Asia could theoretically lead to VLGC spot rates of $132,000 per day.
This price gap has in recent years correlated very well with spot rates from the US Gulf, Hannisdahl said.
Ships are now attracting a strong $94,000 per day for the voyages.
But ample tonnage supply has so far kept a lid on rates at these very high levels, the Norwegian investor explained.
“It will be interesting to see how this develops going forward, as the high number of VLGC newbuilding deliveries during 2023 has been our main concern for the segment for a long time,” Hannisdahl added.
“Also, there is now good visibility on 3Q earnings for listed companies, and GAM is far ahead of Bloomberg consensus. BW LPG and Avance Gas Q2 reporting could be positive triggers,” he said.
The fund has now added a 2.6% long position in US-listed VLGC owner Dorian LPG.
The shipowner's earnings in the three months to 30 June more than doubled to $51.7m as seasonality boosted demand for gas carriers.
GAM also reduced its long dry bulk position by 41% on Monday of last week. Dry bulk now makes up 19% of its portfolio.
Further negative datapoints have emerged from China lately, including deferred payments/defaults from large real estate developers, Hannisdahl said.
Panama Canal wait times a factor
Clarksons Securities said overall VLGC earnings are averaging $80,600 per day.
When Panama Canal wait times are excluded, there is a significant $15,000 per day disparity between the East and West, with the West outperforming, the investment bank said.
“This West premium is bolstered by growing arbitrage and longer wait times at the Panama Canal, as the drought continues to impede the canal’s capacity. At the same time, the Middle East has been quieter, with export volumes slowing in the last two weeks,” analysts Frode Morkedal and Even Kolsgaard added.
Refinitiv data shows Middle East LPG exports fell 23% to 567,000 tonne in the week to 18 August, primarily from Saudi Arabia, Qatar, and Iran.
The forward freight agreement (FFA) market remains upbeat, however, with the fourth quarter from the Middle East to Japan trading at $78,000 per day, with US Gulf to Japan at $94,000.
The FFA market is pricing in a drop to $55,000 per day in 2024, however.
