Despite both LNG and LPG carriers enduring falling rates in recent weeks, Clarksons Platou Securities sees very different prospects for the two sectors.

The Norwegian investment bank said shipowners are facing "divergent paths", with a strengthening in fundamentals for the LNG sector while rates are declining on the LPG side.

Long-term LNG chartering activity remains healthy at fairly strong rates, analysts Frode Morkedal and Omar Nokta added.

By contrast, reduced arbitrage is driving VLGC rates lower, with earnings expected to remain pressured for the next few months.

US exports drive a significant amount of cargo movements for both segments.

Declining US LPG inventories are expected to further reduce export arbitrages for VLGCs, while high LNG prices are expected to keep US LNG export flows moving at a healthy pace, Clarksons Platou said.

The Baltic Exchange's VLGC spot assessment from the Middle East Gulf to Asia was softer on Friday, dropping to $39.29 per tonne or $18,636 per day, 4.7% down on the day, and 33% lower over the last month.

Clarksons Platou puts the figure at an average of $23,000 on a global basis.

Breaking even

This is roughly the free cash flow break-even for shipowners.

The price spread between European propane and US propane has fallen to $40 per tonne from $60 in August, in part due to lower US inventories, meaning fewer cargoes available for the export markets, the analysts explained.

According to the Energy Information Administration, US propane inventories are expected to decline into the winter months, and not build up to within five-year average ranges until mid-2022.

"This suggests exports may be under pressure for some time," Morkedal and Nokta said.

LNG shipping fundamentals continue to shape up nicely, however, the analysts added.

LNG activity rebounds

Omar Nokta, of Clarksons Platou Securities, is bullish on LNG prospects. Photo: Marine Money

After a difficult summer in 2020, when LNG spot prices fell to just $2 per MMBtu globally, causing US export cargo cancellations, activity has been much more positive.

Prior to the pandemic, Clarksons Platou logged an average of 60 LNG carriers exporting US LNG on a monthly basis.

This fell to 25 last summer, but has now averaged 80 vessels per month over the last six months.

"This is tightening capacity further as cargoes from other key exporting regions have held mostly unchanged," the analysts said.

US exports are incremental to the trade and do not "cannibalise" other major exporters, they added.

The Middle East continues to see 125 monthly cargoes, while Australia remains at about 110.

LNG spot prices have now reached $20 per MMBtu.

"Demand for spot LNG ships remains low and our spot rate assessments have eased to $46,000 per day for TFDE [tri-fuel diesel-electric] vessels, but this masks the fact that charterers have shifted to a time-charter approach and overall shipping volumes remain significant," said Morkedal and Nokta.

The investment bank is assessing 12-month TFDE charter rates at $90,000 per day. There is continued interest for deals of up to three years, the analysts note.