The market exploded towards the end of March and after falling precipitously but briefly in May has got back to historically record levels now. Such extreme volatility suggests a very tight supply/demand situation.
Time charter rates have risen in concert with one-year time charter rates for a modern ship now topping $60,000 a day from below $40,000 a day in March.
Increasing demand from developing countries for LPG, especially the Asia Pacific region, and increased availability of product out of the US Gulf are driving the market. The US has gone from being a net importer of LPG to being a net exporter in five years.
Analysts are suggesting that LPG trade between the US and the Asia Pacific region will grow rapidly. US exports of LPG in VLGCs are set to almost double this year to 6.8m tonnes and are projected to grow to 19m tonnes by 2019. Such growth may be enhanced by the opening of the enlarged Panama Canal end 2016, though that would obviously change the ton-mile calculation.
The usual fly in the ointment is the orderbook for new tonnage. The LPG potential has, of course, not gone unnoticed and fully 50% of the existing fleet is on order with a number of new entrants to the market like Scorpio and John Fredriksen.
More than half of this tonnage is due to deliver this year and next which suggests considerable potential for a mismatch in timing between fleet growth and demand growth.
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