VLGCs fall in New Year

Newbuilding deliveries, easing Indian port congestion and China slowness cited.

Spot VLGC freight rates are taking a fall entering the New Year as the market adjusts to more ships hitting the water and easing congestion.

Seaport Global Securities said Wednesday that spot VLGC rates on the major Arabian Gulf-Japan trade route have fallen 21% from a week earlier to $46,667 per tonne.

The Baltic Exchange’s assessment for LPG shipments on the similar Ras Tanura-to-Chiba route showed a similar decline, reaching $51,750 per tonne on 7 January from $63,000 per tonne as of 24 December.

More realism

Seaport senior analyst Charles Rupinski said the decline is more a function of rates coming back down to more realistic levels after some props kept them artificially high.

He points to port congestion in India as one culprit for the recent tightness in VLGC markets. Indeed, a recent strike at a western India LPG terminal tied up one VLGC from discharging. Some ship owners have pointed to the high demurrage fees paid as a result of Indian port congestion.

Now with a strong newbuilding delivery schedule set for 2016, the tight availability of VLGCs should ease.

Capacity comes in

“Rates are reaching their natural level given the vessel capacity coming on,” Rupinski said.

VLGC rates have also been sustained on expectations of strong LPG demand from China’s petrochemical customers. But increasing evidence of a weaker Chinese manufacturing economy may be clouding the picture as to how hard those plants will be running.

Sustaining prior VLGC rates “required the market firing on all cylinders,” Rupinski said.