VLGC Market Began The Second Half Of The Cyclical Recovery

- Mar 06, 2018-

VLGC market began the second half of the cyclical recovery

Drewry, a shipping consultancy, released the latest report saying the VLGC market will resume its cyclical recovery from the second half of 2018 due to the slowdown of fleet growth but the freight rate will not reach 2014-2015 Bull level during the bull market.


Durriad said 2017 was the toughest year in VLGC's shipping history as ample supply of vessels squeezed the freight market. The average gain for the VLGC spot market (AG-Japan route) is $ 12,500 / day, far below the breakeven line of $ 21,000.


The owners hope that the future will be even better as the fleet's annual growth rate will drop from 16% in 2016-2017 to 5% in 2018-2019. However, orders for new vessels will also increase, adding seven VLGC orders in January 2018 as shipowners hope to be prepared for the next cyclical uptrend.


The forecast for VLGC freight for the next three years will be in Derrick and the rent will increase from this year and further increase in 2019-20. However, rentals are unlikely to reach their peak levels in 2014-15 due to a sudden rebound in demand for propane at the new propane dehydrogenation (PDH) plant in China. Eight PDH plants have already been put into operation in China and the other two will be put into operation in 2019. This will prevent a sudden surge in China's imports.


Shresth Sharma, senior analyst for natural gas shipping at DT Road, said: "Our forecast of VLGC freight rates for 2018-20 shows an average freight rate of $ 23,400 / day, down from $ 28,800 / day recorded for 2011-2013."


Shresth added that the reason for the difference between historical and future shipping costs is that many new operators have entered the market during the 2014-15 boom period since 2013 and the VLGC fleet has been more fragmented. For example, there were 62 companies in the VLLGC sector at the end of 2017, an increase of 17% from the end of 2013. It goes without saying that the decentralization of markets reduces the bargaining power between shipowners and charterers.