Charter rates for VLGCs are likely to hold up above the $30,000 per day mark or higher for the year, according to shipbroker and consultant Poten & Partners.
In a webinar Poten LPG consultant Shantanu Bhushan identified three factors as occupying shipowners and other stakeholders minds.
He listed these as concerns over US production, the speed at which OPEC intends to roll back production – where more Middle East-Asia shipments over US-Asia cargoes would decrease tonne miles and the 16 VLGC newbuilding deliveries due for handover in the period to December.
But Bhushan said: “Supply side inefficiencies will most likely keep freight markets firm.”
He said VLGC daily earnings calculated on today’s bunker prices will likely be over $30,000 per day or higher this year, even with the forecast of some backwardation in the second and third quarters before they firm towards the year end.
Ups and downs
The year to date has seen something of a roller-coaster ride for VLGC rates.
Bhushan detailed that the Baltic Exchange benchmark BLPG1 crashed from $119 per ton in 11 January this year to a low of $28 per tonne on 5 March. However, he said it has since recovered to $52 per tonne as of 9 April.
He cited the weather-related disruptions in US Gulf in February and early March coupled with stronger commodity prices which tightened LPG availability in the Far East.
A larger April lifting programme in US has helped absorb tonnage, he said.
In the Middle East producers like Saudi Aramco made more cargoes available for April loadings, he said, and Chinese LPG demand is expected to rise further.
LPG demand in Europe has also risen on higher winter demand.
Transatlantic trade between US and Europe should rise in May which should be supportive of freight rates, the consultant added.
Bhushan said the first quarter also saw a gradual increase in demand from Far East buyers in March.
Never a dull moment
He said the Suez Canal blockage had little impact on VLGCs, which are more driven by the Panama Canal route, but the few diversions helped bolster sentiment briefly.
Chronicling the arbitrage movements for the sector, Poten LPG broker Stuart Chalmers said there is “never a dull moment” in the LPG market.
Chalmers mentioned increasing congestion at the Panama Canal for April which is not starting to ease and dry-docking constraints.
Senior LPG analyst Zahid Afzal said Poten is expecting US LPG exports to grow by 2% this year and 5% in 2022.
Similarly, Afzal said Middle East production is also recovering with exports also expected to rise by 2% in 2021.
