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UP WITH DEMAND GAS TANKERS • SHIPOWNERS IN THE LPG SECTOR HAVE FACED SOME SERIOUS CHALLENGES OVER THE PAST YEAR BUT SEEM TO HAVE COME THROUGH WITHOUT TOO MUCH DIFFICULTY SHIPPING FUNDAMENTALS are generally assessed on the basis of the balance between vessel supply and vessel demand. In the gas trades, certainly in the larger vessel segments, there is though another metric to be taken into account: the price of LPG in different parts of the world. For very large gas carriers (VLGCs), which in a normal market work exclusively in LPG, earnings over this year have reflected the generally tight arbitrage between domestic US prices and those available in the major importing countries in Asia.
LENGTHENING WAITING TIMES FOR PANAMA CANAL TRANSITS ARE HELPING REDUCE EFFECTIVE VESSEL SUPPLY AND SUPPORT FREIGHT RATES FOR LARGER CARRIERS
HCB MONTHLY | DECEMBER 2021
High LPG prices in the US reduce the availability of export volumes and also reduce end-user demand, particularly in the petrochemical sector, depending on the competitive position compared to naphtha prices, and in the propane dehydrogenation (PDH) market, a significant draw for propane imports into China in particular, where margins are currently very tight. These factors tend to unwind but it takes time. High prices in the US are prompting investment in well completion, bringing more NGL volumes into the market and adding to inventories, though these are currently still below the five-year rolling average. That had a noticeable effect during the third quarter, with North American LPG exports up by 16 per cent compared to the same period in 2020. The other issue facing the global LPG
trades over the past year has been the output curbs introduced by the Opec+ nations, primarily to support global crude oil prices. That has meant less associated gas and lower LPG availabilities. That situation does seem to be easing somewhat, although Saudi Arabian LPG exports were also constrained in July due to production issues relating to power outages. On the other hand, Iranian exports have recovered, rising more than 90 per cent year-on-year in the third quarter, with most of that heading, not surprisingly, for China. FEEL IT IN THE POCKET Overall, in fact, the third quarter was a decent one for the major VLGC owners. BW LPG recorded timecharter equivalent income of $104.8m, up from $101.5m in the same period in 2020, with a more even balance between timecharter and spot earnings. EBITDA slipped slightly to $64.5m, though operating profit improved from $32.5m to $39.2m, largely as a result of one-off gains. Dorian LPG posted revenues of $63.1m for its second fiscal quarter to end September, up from $54.7 a year earlier, with operating income well ahead of 2020 levels at $19.1m and net income rising from $0.54m in the same period 2020 to $14.1m. Avance Gas
