VLGC

2015 was yet another action-packed year for the VLGCs, with the highest average earnings of all time, the second highest average rates of all time, volatility and high ordering activity. This year as in the last two years, increased US export capacity was the driver for both freight rates and ordering activity.

The Baltic LPG Index (BLPG) bottomed out at USD 60 per metric ton (pmt) in the start of January, which equals about USD 1.5 million per month on time charter equivalent (TCE), before it went on an increasing trend, supported by increased US export volumes, west-east arbitrage movement, and high Indian spot demand combined with congestions in Indian ports. The BLPG stabilized at around USD 100 pmt at the middle of February (USD 2.8 million TCE) before it declined to around USD 80 pmt towards the end of March (USD 2.3 million TCE). Then, supported by the seasonal summer market, the BLPG increased again towards the peak of USD 137 pmt in mid-July (USD 4.2 million TCE). For the reminder of the year, freight rates were on a downward slope, with the BLPG being assessed at USD 63 pmt (USD 1.86 million TCE) at the last day of the year. Average BLPG for 2015 ended at USD 91.843 pmt, which is the second highest average value since the all-time high of USD 92.491 pmt in 2014. Measured by earnings though (excl. waiting time), the average BLPG TCE was at all-time high for 2015 at USD 2.68 million per month, supported by low bunker costs as well as strong freight rates.

A record number of 35 VLGCs were delivered in 2015, while no vessels were scrapped. The orderbook expanded by 29 new vessels, with 24 of them being placed in second half of the year, in front of new regulation, which makes vessels more expensive and with smaller cargo capacity. 8 of these orders were Panamax VLGCs able to transit the existing Panama Canal lane.

Going forward, the fundamentals will soften on the back of delivery of the large orderbook. How much fundamentals and rates will soften is dependent on the crude oil price development, as this drives US LPG production, Asian LPG demand as well as the LPG location arbitrages.

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