Analysts are backing a continuation of the good times for gas carrier owners as LPG production rises.
The VLGC market has come back to life after the festive season, Fearnley Securities said.
The investment bank pegs average spot numbers at about $52,000 per day, with levels slightly higher west of Suez.
Rates have remained relatively flat at strong levels, Fearnleys noted.
"In the Middle East Gulf, sentiment has come off slightly, but a few uncovered cargoes may help slow things down somewhat," analysts Peder Nicolai Jarlsby, Erik Gabriel Hovi and Ulrik Mannhart said.
"In the west, focus has shifted to February and the question is how long current rates can be maintained. However, delays in discharge ports globally and increased uncertainty related to Covid could prolong the current earnings environment," they added.
Valuation platform VesselsValue and research company ViaMar said high domestic consumption and low inventories caused LPG exports to decline in the fourth quarter, despite a 6% increase in propane production in the US.
Unfavourable pricing kept European LPG interest low, the companies said in their first-quarter shipping forecast.
But they believe US and Middle Eastern production of LPG is set for growth in 2022 and 2023.
Middle East increases will be driven by a reversal of oil production cuts by Opec+.
Healthy export numbers
LPG exports from the Middle East could grow by 5.7% and US export growth may rise 6.5% in 2022.
In the US, growth in refinery throughput and oil and gas production will see higher availability of LPG.
Asia is likely to remain a prime destination for LPG imports, the report says.
"New petrochemical plants with the ability to switch from oil to LPG feedstock will increase attraction of LPG in Asia and Europe in a medium to high oil price scenario," the companies argue.
Both regions are set for import growth in the next few years.
And demand for ammonia for fertiliser is set to be firm in Asia, Africa, South America and Europe.
But VesselsValue and ViaMar see a cloud on the horizon in the form of high fleet growth next year and in 2024 for larger ship types due to the delivery of newbuildings.
"This will challenge the demand growth and earnings may trend lower," the report said.
"For smaller sectors, the fleet is set for moderate growth and may support improved earnings," the companies added.
Order interest ebbing
As for future orders, the duo reckons newbuilding appetite for VLGCs and midsize carriers (MGCs) has now subsided.
"Except for occasional orders for coastal LPG vessels, mostly from Asian owners, there is little newbuilding interest currently," the companies said.
MGCs saw their earnings rise to $900,000 per month in December, VesselsValue and ViaMar said.
Refining, which dipped under 70m barrels per day in 2020 globally, has continued to gain in 2021 with support from increased car and air traffic, they added.
The result is more LPG for short-haul demand, which benefits the coastal LPG fleet.
"Unless the new Omicron variant stalls the recovery, we expect firm demand from manufacturing and energy in the aftermath of the Covid-19 pandemic," VesselsValue and ViaMar said.
