BW LPG’s foray into commodities trading — a rare move for a shipowner — could be aided by its parent group’s takeover of smaller peer Epic Gas for gas distribution, according to chief executive Martin Ackermann.
With the world’s largest LPG shipping capacity, the Oslo-listed unit of BW Group in February unveiled its product services team, which was set up to buy LPG and deliver it on a cost, insurance and freight basis to end users to maximise fleet utilisation.
Nearly all the 49 vessels in BW LPG’s fleet are VLGCs, suitable for deepsea trades. In contrast, Epic Gas, nearly 55% owned by BW Group, operates 39 pressurised LPG carriers up to 11,000 cbm.
Cooperation
Ackermann tells TradeWinds that Epic Gas could assist in BW LPG’s distribution operations in the future. “We are excited to explore possible opportunities for collaboration with Epic Gas at the appropriate juncture, for end-to-end and breakbulk distribution into local distribution networks,” he says.
For example, US LPG can be shipped to Asia on BW LPG’s VLGCs before breaking the cargo down into smaller parcels onto Epic Gas’ ships through ship-to-ship (STS) transfers, for distribution in regional trades. In fact, Epic Gas' vessels already lighter from BW LPG’s 78,489-cbm Berge Summit (built 1990).
BW LPG has [been] engaged in STS operations with Epic Gas vessels and we are impressed by the quality of operations
Martin Ackermann
“BW LPG has [been] engaged in STS operations with Epic Gas vessels and we are impressed by the quality of operations,” Ackermann says.
Trading the cargoes their vessels carry allows shipowners to harness a larger chunk of the supply chain, fitting into the prevalent hypothesis that more shipping companies will need to turn to logistics players to survive in the long run.
Veteran traders hired
However, some market participants point out that only large shipping firms with sound financial profiles will have a better chance of success in such ventures. Compared with operating vessels, cargo trading operations can often require larger working capital and different expertise.
BW LPG’s product services division has hired five veteran traders, backed by trade finance provided by BNP Paribas and Credit Agricole CIB.
“Access to attractive financing, an extensive client network and operating the largest fleet in our industry is enabling us to take the step into product services by leveraging the existing set-up,” Ackermann says. “The equity requirement is minimal.”
Competition question
Many trading houses are also chartering BW LPG’s vessels, raising the question over whether the company is competing with some clients.
“There is an element of trade, but the fundamental mandate of the division is to increase fleet utilisation and play a supporting role to our core shipping business,” Ackermann says.
“We aim to provide a low-risk and fully integrated product delivery service to customers. Feedback from our investors and clients has been very positive and supportive.”
