Energy trader BGN International has chartered one VLGC at a rate that signals the LPG market will continue to be strong into next year.

Gas sources said the Dubai-based trading company has time-chartered one scrubber-fitted VLGC from Eneos Ocean of Japan for 12 months at more than $12m. The charter period is from November to October 2023.

They said BGN is paying more than $1m per month for the Mitsubishi-built 78,900-cbm Yuyo (built 2008), despite over 50 VLGC newbuildings set to be delivered next year and existing vessels having to comply with the Energy Efficiency Existing Ship Index.

Officials at BGN and Eneos Ocean were not contactable.

One gas player described the LPG market as “hot” and thinks it will continue to be strong for a while.

“When you see players like BGN fixing such types of vessels for that sort of money for a period covering most parts of 2023, I think it says a lot,” said the source.

He added that active market players such as BGN normally have a pretty clear view on the market and its outlook.

He described the VLGC Yuyo as a previous generation ship and is one of the gas carriers that may be affected by next year’s new legislation.

“When they [BGN] are willing to pay over $1m per month for Yuyo, in a period that basically covers 2023 and with all the newbuilds…that is a sign of strength for the market,” said the gas player.

“I believe the market will stay firm, and obviously so does BGN. Otherwise, they would have played the spot market instead of taking the ship for a period.”

The VLGC market was reported to have started relatively soft in the third quarter of this year but earnings for the ship type have improved.

On 13 September, Fearnely Securities reported that VLGC rates had improved by 46% month-on-month.

“We see improving fundamentals in the short term, which together with seasonality effects sets up a strong rate backdrop for the remainder of the year,” analysts Oystein Vaagen, Erik Gabriel Hovi and Ulrik Mannhart added.

“With the increasing demand for gas going into the winter season, we are hearing increasing talks of switching from LNG to LPG, due to high LNG prices, which should be a positive for LPG shipping.”