Analysts have been caught out somewhat by the strong sale price achieved by BW LPG for a 2005-built VLGC.
The 78,908-cbm BW Empress (built 2005) went to Bashundhara Oil & Gas in Bangladesh for about $40m, the company revealed earlier this month.
BW LPG made a book gain of $10m from the vessel it acquired from Ocean Trust of Japan just 12 days earlier.
The ship was believed to be debt free, suggesting an acquisition by BW LPG at $30m, probably as a purchase option under a three-year leaseback deal.
VesselsValue had assessed the VLGC as worth $37m when BW LPG reacquired it.
"The price is another strong data point on the tail end of the VLGC asset curve, with values firmly above the newbuilding parity line," Norwegian investment bank Fearnley Securities said.
$5m above expectations
The price is $5m above Fearnley's estimate for similar tonnage.
"While we are likely to lift the tail end of our curve following a few strong prints, limited transactions of modern tonnage makes actual secondhand values here harder to pinpoint," said analysts Espen Landmark Fjermestad, Peder Nicolai Jarlsby and Ulrik Mannhart.
VLGC spot rates continue to hover in the mid-$30,000 per day range, with earnings on routes from the US to Asia now overtaking runs from the Middle East to Asia.
The Baltic VLGC index showed rates at $33,000 per day on Monday. The US to Asia is assessed by Fearnley at $35,300.
Improved product market
"The development in the West has been driven by higher activity on improved product market where domestic US prices have softened and Asian prices have firmed slightly," the analysts said.
"While the shipping balance on the face of it looks stronger in the West than the East, the return of the Western premium may see some owners ballast west to capitalise on this, equalling the playing field between the basins."
Fearnley believes it is premature to label the product market healthy, but there are certainly more positive signs than were seen in the first quarter.
Cleaves Securities said VLGC spot rates had plummeted 85% between January and March.
The short-term outlook is dependent on regional LPG pricing amid low inventories, but shipping is tight and likely to remain so until 2022, head of research Joakim Hannisdahl added.
'Buy rating'
"The recent surge in newbuild ordering could thereafter push fleet growth into double digits concurrent with falling demand growth. We do however believe it is too early to think about cyclical contraction and reiterate our 'buy' on the segment with a potential 35% upside for shares," he said.
Brokers reported that arbitrage economics remain challenging and that Panama Canal transit times are back to normal.
"However, vessel speeds have been declining for VLGCs in the past few weeks and have, everything else [being] equal, helped tighten vessel capacity," Clarksons Platou Securities said.
Ballast speed has dropped from 14.5 knots earlier in the year to 13.9 knots at the start of April, with laden speed unchanged at 14.5 knots.
Average speed is down around 2%, Clarksons Platou calculated.
