Norway’s Gersemi Asset Management has exited its long VLGC positions as the market powers along at record rates.
The shipping investment fund, managed by Joakim Hannisdahl, said it had rebuilt its position in the LPG sector due to a significant increase in the regional gas pricing differential between the US and Asia.
This gap is supportive of VLGC spot rates of around $176,000 per day, the company believes.
Spot rates surged 18% during the past week and were averaging around $166,000 by Friday.
Hannisdahl told TradeWinds the fund had sold out of its long VLGC positions on Monday for “decent gains” amid a rout in prompt forward freight agreement rates, which are now far below spot levels.
He explained he is not comfortable being long if or when spot rates fall $20,000 over a few trading sessions.
“Things change fast in shipping and Gersemi Shipping Fund will always be agile and light-footed,” he said.
“Listed VLGC companies are now booking these spot rates for 4Q and we see the potential for a large positive revision to consensus estimates with potential annualised dividend yields around 30% for 4Q,” added Hannisdahl.
“Although it feels quite windy and exposed at the current lofty levels in regard to earnings, the market seems well-supported in the near term by one-year time charter rates around $60,000 per day and LPG future curves indicating a time charter equivalent average of $170,000 per day until year-end,” he added.
Hannisdahl sees the biggest risk in the near term as the continued influx of newbuildings, with around 28 delivered so far in 2023 and another 14 expected for the remainder of the year.
“The increased fleet supply has however been absorbed so far by a significant increase in demand, especially ex-US Gulf, but also from vessels ballasting via Cape of Good Hope to omit high costs and risk of delays via the Panama Canal,” he said.
Gersemi’s shipping fund now stands up 9.5% since inception, its best-ever valuation, at $1,095 per share.
Gas shipping executive Oystein Kalleklev told TradeWinds on Monday that record VLGC earnings are now up where they belong.
‘How it should be’
The chief executive of John Fredriksen-backed VLGC owner Avance Gas and LNG carrier company Flex LNG told TradeWinds that spot rates are “now getting to LNG carrier levels”.
“That’s how it should be,” he added.
Kalleklev pointed out that the arbitrage between the West and Asia is $330 per tonne.
The freight rate is $183 per tonne from the Middle East to Asia.
