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Newbuilding deliveries to hit red hot VLGC market

Newbuilding deliveries to hit red hot VLGC market
The hottest sector in shipping, VLGCs, will be hit by the deliveries of large number of newbuildings, but owners do not expect the market to collapse.

With VLGCs earning in excess of $100,000 a day boosted by the US shale gas revolution, owners have piled in with newbuildings orders in this niche sector and as a result the orderbook stands at roughly 60% of the existing fleet of 160 – 170 vessels.

This is leading to concerns as to what will happen when these vessels start delivering in large numbers in 2016.

“It’s very difficult in any shipping market to have a 60% orderbook and absorb that. It will be very difficult to have 80 ships to come,” Vijay Kamath, cfo of BW LPG, told delegates at Marine Money Asia.

“There will definitely be turmoil when the ships are delivered. There will be more moderation in rates as the ships are delivered.”

Karpal Cheema from the LPG division of Phoenix Tankers noted that it was a market that was extremely sensitive to the demand supply balance. “The demand and supply balance gets reflected very quickly in the market,” Cheema explained. “This is one of the most volatile sectors in shipping.”

However, Cheema does not expect the market to crash. Looking ahead he said 2015 would be good and could be better than this year, 2016 would see the market drop a bit, 2017 would be the lowest point, and 2018 would see the market start to pick-up again.

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