According to MANA, BW LPG, which owns the world’s largest fleet of very large gas carriers, has taken delivery of the first VLGC newbuildings of 2017.
Delivery of the two newbuildings marks the start of a delivery schedule that should see 31 new VLGCs enter the global fleet this year, according to Clarksons’ data.
While this figure seems high, last year’s deliveries reached 46 new VLGCs and 35 were delivered in 2015. Those heavy delivery schedules contributed to the downturn in the VLGC freight market, dragging rates and earnings down.
Many experts predict that this year’s delivery schedule will take a similar toll on the freight market.
However, others suggest there is no need to panic. Price spreads — driving liquefied petroleum gas trading and vessel demand — could yet prove to be fruitful, offsetting the impact of the newbuilding delivery schedule.
“The risk of a secular decline in LPG transportation demand, which still seems to be the base case in equity market valuations, is exaggerated,” argue the analysts at DNB Markets. “We expect the propane price differentials to normalise, which should lift VLGC rates despite still-declining fleet utilisation from 2016 into 2017.”
Spot rates have indeed lifted this year, although only marginally thus far.
BW LPG, which now runs 40 VLGCs following its recent acquisition of Aurora LPG, has echoed the positive sentiment on price spreads.
Amid freight market hopes and fears, the company is focused on operating its growing fleet. The newbuildings it received were BW Mindoro and BW Messina, the final two of four VLGCs in its newbuilding programme from Daewoo Shipbuilding & Marine Engineering.