Rising demand has prompted owners to order more and larger LPG vessels, according to the latest LPG Forecaster from Drewry Maritime Research. The increased demand has been further improved by a growing consumption base in emerging economies, with supply bolstered by an expected emergence of new export sources, notably the US and the Russia. LPG demand in the so-called saturated markets, such as Japan and South Korea, is also expected to remain robust on the back of government support and increasing consumption in sectors other than the residential sector.
China has also been investing in PDH units, which could help imports to recover in the medium and long term. These developments, or expected developments, from both the supply as well as the demand side, have led owners to believe that tonne-mile demand could rise in the medium and long term. In response, newbuilding activity has gained momentum.
Only five VLGCs were ordered during 2010 and four in 2011, but there were 11 orders for VLGCs aggregating more than 0.9 million cbm during 2012. The average size has grown too, rising from 15,179 cbm in 2010 to 32,125 cbm last year, on the back of the 11 VLGC orders.
Shantanu Bhusan, editor of the LPG Forecaster says, “Clearly, owners have shown a growing preference for larger vessels in the past few years so as to reap economies of scale, and as infrastructural facilities at ports have been improving.”
In October, Frontline confirmed options for two more VLGCs of 84,000 cbm each at Jiangnan Changxing for delivery in the fourth quarter of next year. Frontline had earlier announced that it would order up to six VLGCs, of which four orders have been confirmed so far. Tomza Group has also entered the VLGC market by placing an order for a VLGC at Hyundai HI for $73.5 million. The vessel is scheduled to be delivered in April 2014.