The value of LPG carrier newbuilding orders in the first three months of 2024 was the second highest on record, according to Clarksons.
Shipowners placed orders worth a total of $3.9bn between January and March 2024 second only to the value of orders in the fourth quarter of 2023.
The high value of orders has been helped by the increasing in the cost of a VLGC newbuilding which currently stands at $118m, up 53% from the $77m at the start of 2021.
“LPG carrier contracting has been firm so far this year, with 37 units of 2.6m-cbm contracted in the first quarter, the highest quarter since the second quarter of 2021 and up 37% year-on-year in capacity terms on an annualised basis,” Clarksons said.
“Firm contracting has been supported by strong sector earnings over the past 12-18 months, as well as notable interest in very large ammonia carriers (VLAC), with 45 VLACs ordered since May-23.”
Clarksons says the LPG carrier fleet stood at 1,651 units of 47.8m-cbm at start April, up 2.3% in capacity terms since the start of the year.
This follows deliveries of 18 units of 1.1m-cbm in the first quarter of 2024, with deliveries of 2.7m cbm projected across the full year, driving fleet capacity growth of 5.1%, the broker said.
Clarksons said global LPG trade is projected to grow by 2.8% to 131mt this year, driven by US export growth, with US LPG exports projected to grow by 4% to 60mt, having risen by around 5% year-on-year in the first quarter.
“On the importer side, China is expected to account for the majority of global import growth this year, with LPG demand supported by propane dehydrogenation (PDH) plant capacity expansions,” Clarksons said.
“Chinese LPG imports are projected to grow by 8% to 37mt this year, having started the year firmly, growing by around 25% year-on-year in the first quarter.”
Last week VLGC spot rates increased to $53,200 per day last week, nearly 16% higher than the previous week, owing to a significant East-West price spread expansion, Clarksons Securities said in a report Monday.
“LPG shipments to Asia reached a record 7.5mt in April, thanks to strong Chinese demand and the opening of new PDH plants in late March,” analysts Frode Morkedal and Even Kolsgaard said.
“FFA market quotes also rose 10% last week, though third quarter contracts suggest a slight slowdown in earnings to the low end of $50,000/day.
“The Panama Canal is expected to further normalize capacity in the coming months, which could have a negative impact on the VLGC segment,” the analysts added.
Looking ahead to 2025, Clarksons said another year of healthy VLGC market conditions is expected, though there is potential for slightly softer average earnings amid weaker headline fundamentals.
“Global LPG trade is projected to grow by 3.3% to 135mt, driven primarily by US export growth, though with Middle Eastern volume growth also expected to provide some support,” Clarksons said.
“Import growth is expected to be driven by China and India, with additional support from SE Asia.”
However, the broker says LPG tonne-mile trade growth is projected to fall to 1.2% on the assumption that Red Sea and Panama disruption unwinds, while fleet capacity growth of 3.8% is projected and 4.2% for VLGCs.
