An ageing VLGC fleet is ripe for scrapping after a dearth of such activity in recent years, according to Avance Gas.

The Oslo-listed owner said 56 big gas carriers are now aged over 20 years.

But around half of these have been involved in sanctioned trades with Iran, providing an incentive for further trading, consultancy Kpler estimates.

“Eventually, demolition is set to pick up pace,” Avance said in its third-quarter report.

It added that there has in effect been no VLGC scrapping since 2018.

The only vessel listed as recycled since then is Buana Lintas’ 78,500-cbm Gas Komodo (built 1991), which was sold into Bangladesh this year.

Avance also said the effects of stricter environmental regulations should support the market in 2023.

“Already now, industry sources indicate tonne-days to be trending higher due to fleet inefficiencies and lower sailing speeds,” it added.

Fleet availability is likely to decline further as older vessels face speed limitations to reduce emissions, the John Fredriksen-controlled company believes.

Nuclear deal could be crucial

Avance Gas said it remains hard to predict when and if the US and Iran will reach an agreement on Iran’s nuclear programme, and developments recently indicate stalling discussions.

“However, a potential agreement will have large ramifications for availability of modern VLGCs, as Iran would start requiring more efficient vessels to ship their exports,” it said.

The wide price arbitrage between US and Asian propane would also support rates if it endures.

Mont Belvieu propane prices have trended down for most of 2022 on production rises and inventory builds, leaving an improved arbitrage despite a relatively saturated product market in Asia.

Looking beyond 2023, the supply-demand balance starts to look increasingly favourable, the shipowner believes.

Twelve VLGCs are scheduled for delivery in 2024 and three in 2025.

These 15 would represent 4% of the fleet, assuming no scrapping.

“We expect limited room to add more orders for 2024, while inflated newbuild values are likely to put a cap on newbuild orders also for 2025,” Avance Gas said.