VLGC rates hold steady thanks to Middle East

VLGC rates hold steady thanks to Middle East

Strong Arabian Gulf-Japan LPG rates support VLGC sector despite vessel supply glut

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Very large gas carrier rates are forecast to remain strong but volatile through the rest of this year, according to analysts, with Arabian Gulf-Japan rates continuing to grow.

This is the outlook of the sector, despite the fact that 37 new VLGCs are due for delivery in 2015. These new gas carriers are expected to be absorbed by a surge in long-haul US LPG exports and persistent congestion at Indian ports absorb the new vessels.

In 2016, however, more than 40 VLGCs will be delivered, and this may put pressure on freight rates, brokers have warned.

“In the first four months of 2015 we have seen increased volatility in the LPG spot market continuing, including a short recovery in late February,” reports shipping brokerage Banchero Costa Research.

VLGC rates on the key Arabian Gulf-to-Japan route have continued to increase to around US $110/mt at the time writing.

A shortage of vessels due to Indian congestion and US exports had sent the Baltic index to a record of US $143/mt in July 2014, while rates in the first four months of this year have averaged US $88/mt, versus US $73/mt in the same period last year.

Banchero Costa Research says that 23 vessels of all sizes were delivered in the first four months of 2015, representing a total capacity of 800,000 cubic meters, including seven VLGCs, or vessels of more than 70,000 cu m.

RELATED: Iran increases VLGC fleet for LPG exports

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