An oversupply of vessels in the liquefied petroleum gas (LPG) shipping market is expected to continue over the next couple of years, thereby helping keep freight rates low across most size segments, according to a new analysis by global shipping consultancy Drewry.
Drewry’s latest edition of its LPG forecast also states that the small-vessel segment, defined as 1,000-5,000 cubic meters, is the only category where fleet growth will be minimal, potentially leading to a recovery in rates. After growing at a 4 percent annual rate over the last three years, pressurized vessel fleet growth is anticipated to slow to 3 percent this year.
Most vessel size segments, however, are expected to experience another year of rapid supply growth in 2017, with the overall fleet expanding by 16 percent, according to the forecast, which will continue to put downward pressure of pricing over the next two years.
Thereafter, pressurized vessel fleet growth is likely to turn negative because only one vessel will be left from the current orderbook to be delivered in 2018 and none beyond, while some vessels are scheduled to be demolished, the forecast said.
Although the improvement in rates is expected to be led mainly from the supply side, some push will also come from the demand side, according to the report, as refining capacity expands in China, increasing cargo supply for the intra-regional trade.
“As a result of slowing fleet growth, Drewry expects rates for small LPG vessels to strengthen further,” Drewry senior analyst Shresth Sharma said, adding that time charter rates for a 3,500 cubic meter pressurized vessel is anticipated to average $182,000 per month in 2017, an increase of 8 percent from 2016.
“As fleet growth slows further from next year, rates will continue to improve and average $210,000 per month by 2019,” Sharma said.
Drewry: Vessel oversupply, lower rates in LPG market to continue
Most liquefied petroleum gas vessel size segments are expected to experience growth in 2017, with the overall fleet expanding by 16 percent, according to London-based maritime consultant Drewry.
