LPG earnings sky high – VLGC one year time charter rates more than double
Newbuilding contracts so far this year are up by c. 82%
With LPG earnings currently at all-time highs, we take a brief look at what is behind this bull run and the impact that this may be having on vessel values.
VLGC one year time charter rates are at around 1,700,000 USD/Month, the highest levels since 2015 and compared to last year, an increase of c.70%. Similarly, the Baltic Exchange BLPG1 is currently at a record high of 151.43 USD/MT an increase of c.137.7% from the same period. The equivalent to this is USD 140,000 per day, or MUSD 4.2 pcm.
The strong market is mainly driven by a number of factors including the exceptionally strong US LPG growth which is a result of low consumption and firm production growth. Other contributing factors, include a strong arbitrage for propane in Asia, the start up of several new PDH plants in China and strong export growth out of the Middle East.
New investment in this sector has also strengthened year on year and newbuilding contracts so far this year are up by c. 82%. The majority of orders were in the VLGC LPG sector, with c.66.7%. Singapore led the way with new orders, accounting for c.27.4%, followed by the UK and Norway in joint second place with c.11.8%. Greece and Japan rank third with c.7.88% each. Notable new orders include:
4x VLGC (VLAC) carriers of 88,000 CBM in a joint venture between Capital Gas and Eastern Pacific Shipping, scheduled to be built at Hyundai Heavy Industries and delivered in 2027. The vessels were contracted for USD 116.44 mil each en bloc.
3x VLGC LPG carriers by Solvang ASA, contracted for USD 106.65 mil each, en bloc, VV value USD 105.57 mil each, scheduled to be built at Hyundai Heavy Industries and delivered in 2026.
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