The VLGC rate roller coaster is on the up once more as business is driven by more stable export conditions in the US.
The Baltic Exchange assessed Middle East Gulf to Asia spot rates at $39,500 per day, up 50% over the week.
Clarksons Securities said earnings had risen due to a surge in chartering activity after several weeks of low cargo volumes.
Rates had dipped below $7,000 per day earlier this month, a stark collapse from record levels of more than $170,000 per day last autumn.
The latest increase came as US propane inventories, which fell sharply due to recent cold weather, began to stabilise, even though they remain lower than the five-year average.
Despite this, the Energy Information Administration predicts a slowdown in US export volumes for the rest of the year.
“Furthermore, as gas prices fall, US natural gas producers are reducing their spending and drilling efforts, which has an impact on LPG production because LPG is a by-product of natural gas extraction,” Clarksons Securities added.
The market’s immediate focus is on the Panama Canal, where water levels remain below the five-year average, reducing transits and boosting LPG rates through increased tonne-miles.
“However, as El Nino’s dry spell ends, the upcoming rainy season may begin to replenish reservoirs,” the investment bank warned.
Baltic Exchange forward freight assessments indicate that VLGC spot rates are expected to average around $40,000 per day for the rest of the year.
Stock prices down for the year
VLGC owners’ share prices have dropped about 15% so far in 2024.
But Clarksons Securities estimates that stocks are still pricing in spot rates of between $45,000 and $50,000 per day for the rest of the year.
Sister outfit Clarksons Research said there was a continued uptick in VLGC spot rates as the market recovers from sharp declines in January.
It sees “potential for further gains” should the arbitrage caused by the difference in US and Asian gas prices continue to widen.
