Persian Gulf-Japan LPG freight rate near one-year high on tight VLGC availability

2015-07-17

The freight rate for Very Large Gas Carriers plying the major Persian Gulf-Japan route with refrigerated LPG cargoes climbed up $3/mt day on day to $135/mt late Wednesday, almost touching a one-year high amid limited availability of vessels, traders said Thursday.

The last time the freight rate was any higher was on July 23, when Platts assessed the VLGC Persian Gulf-Japan route at $140.50/mt, Platts data showed.

“Vessels are doing longer voyages that tie up [their availability],” a Singapore-based trader said.

“Not sure how long this will [go on for as] many newbuilds are coming online [later this year].”

Over the last few years, it has not been unusual to see high freight costs for moving LPG from the Persian Gulf to North Asia.

According to trade sources, increased spot volumes of LPG from countries such as the US and the Middle East have tightened the availability of VLGCs for spot lifting.

In June, Pareto Securities said in a research report that it expects US LPG exports to hit 19 million mt in 2015 and 24 million mt in 2016, Platts had reported earlier.

However, VLGC rates for the Persian Gulf-Japan route is expected to ease later this year amid an increase in newbuild gas carriers.

“There is a chunk of newbuild deliveries in Q3-Q4 2015 … that would ease the pressure on shipping,” a second trade source said.

According to the Pareto Securities report, the newbuilds will start to take its toll on the VLGC market in the third quarter this year.

Of the fleet of 182 vessels — of 60,000 cubic meters and above — 33 units are slated for delivery this year, Platts had reported.

Another 46 VLGCs are expected by 2016 and 18 by 2017, the report said.

The report said that shipping company China Peace was heard to be making another effort to order six to 10 vessels from South Korea’s Daewoo Shipbuilding & Marine Engineering, which is supposed to be an order for 2018.

Source from : Platts

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