BW LPG bosses have warned that delays at the Panama Canal do not translate into pure profit for VLGC owners through higher rates.
The Singapore company’s commercial executive vice president, Niels Rigault, told an earnings call that a lack of seasonal rainfall has caused the canal authority to limit transits to preserve water.
“This limitation on VLGC transits could result in a 50% increase in sailing days for the fleet trading between the US and the East, subsequently pushing up rates,” he said.
“However, it’s crucial to note that the inefficiencies leading to high rates also translate into increased costs for owners and traders, a burden not easily passed on to end users.”
Last week, a booking slot auctioned by the Panama Canal Authority fetched a record price of just under $4m.
VLGC spot rates are averaging more than $100,000 per day in the fourth quarter, after hitting records of more than $170,000 in the summer.
Daily canal transits will be cut to 18 by February, from 24 later this month.
“Looking forward, our supply-demand models suggest a positive outlook for the shipping market. Of the 43 VLGC newbuildings scheduled for delivery in 2023, 75% have already been delivered. We anticipate further growth in LPG exports from North America and the Middle East,” Rigault said.
BW LPG chief executive Kristian Sorensen told the call the “much-talked-about disruptions in the Panama Canal … will continue to absorb capacity from the VLGC fleet”.
“VLGCs have lower priority than LNG carriers and container vessels, forcing them to sail alternative longer voyages from the US to Asia via Suez or South Africa,” he explained.
The Oslo-listed owner said its daily time charter equivalent rates averaged $61,800 between July and September.
Third-quarter net profit was $122.3m, against $46.4m a year ago.
Revenue climbed to $150.5m from $100.8m in 2022.
