South Korean shipowner KSS Line has been linked to an order for a pair of LPG-fuelled VLGC newbuildings worth a total of KRW 183bn ($162m) at Hyundai Heavy Industries.
Korea Shipbuilding & Offshore Engineering Co (KSOE) announced on Thursday that its HHI yard had inked a contract to build two 86,000-cbm LPG carriers for delivery in first half of 2023. But the yard group did not name the party that booked the ships.
Shipping sources with knowledge of the deal said KSS Line was the shipowner behind it.
KSS is said to have ordered the pair of VLGC newbuildings on the back of charter contracts from Dubai-based BGN International.
“It’s a long-term charter of more than five years,” said a shipping source. The charter rate is not disclosed.
The contract prices of the newbuildings, which will be fitted with dual-fuel engines that can run on LPG and fuel oil, are about $81m each.
Including these two newbuildings, BGN has taken a total of six VLGCs from KSS. The other four vessels, which run on conventional fuel oil, were fixed for five to seven years.
KSS ordered the scrubber-fitted quartet between 2019 and early 2020 at a reported price of $74m apiece.
BGN has taken delivery of three VLGCs — the 84,000-cbm Gas Ares, Gas Gala and Gas Barbarossa (all built in 2021). It is due to take delivery of the fourth vessel, to be named Gas Ghazi, in late August.
Order haul
KSOE, the shipbuilding wing of Hyundai Heavy Industries Holding, said its group yards have netted 34 of the 58 LPG carriers contracted this year and forecast that demand for gas ships will rise with global economic recovery.
KSS hit the VLGC order trail in January, booking its first LPG-fuelled newbuilding at HHI for delivery in third quarter 2023.
This order was for a 91,000-cbm VLGC booked against a five-year charter deal with Thailand’s state energy company PTT following a tender process for the business.
The LPG market enjoyed a strong second half in 2020, prompting a return to newbuilding ordering, as owners took advantage of the chance to contract dual-fuel vessels of slightly larger capacity.
Shipbroker Clarksons lists at least 33 VLGCs ordered in the first four months of this year.
Charter rates crashed back in the first quarter but they rebounded in March on the back of a rise in US exports to Asia on long-haul routes. The anticipated dry docking schedule for 2021 is also expected to hold up levels for the year.
Martin Kjendlie, a senior advisor at Fearnleys' research division, is optimistic on the VLGC market and believes it will perform strongly in the years ahead.
“We are seeing about 60 newbuildings for deliveries until 2023. This is a 20% orderbook, and reflects well the strong markets we have experienced since 2019,” he said.
“We believe we will continue to see strong markets, with several variables contributing to a stronger supply-demand balance.”
He noted that LPG volumes have grown 50% since 2015.
“Therefore, it is a market that is still experiencing decent growth," he said. “The growth figure was obviously paused by the pandemic.”
