inforMARE - FORUM dello shipping e della logistica

The Liquefied Petroleum Gas Market in 1998

Situation by ship size segments

VLGC - 70,000-86,000 cbm

All things considered, 1998 was a reasonable period despite the lack of spot activity and the usual freight fluctuations permanently seen on this size traffic.

On the spot front, the first half of the year saw a steady increase on the spot rate Middle East Gulf / Far East, the traditional freight reference voyage for this segment of tonnage, moving from low $20s at the beginning of the year to low $30s at mid year. The second half was less active and depressing and the spot rate for same rotation turned out to be difficult to assess. Few were the spot transactions, confirmed at the end of the year around $20/tonne, equating to a time charter equivalent of around $500,000 per calendar month for a 75,000 cbm ship. The average spot freight level for the year can however be assessed at around $26/tonne which gives a monthly t/c equivalent of around $650,000.

The time charter front was surprisingly active, mainly during the first half of the year and several medium term time charters were concluded at a monthly level ranging between $680,000 and $825,000 depending on period and ship performance. However, as said earlier, renewals of longer term commitments by traditional traders were not all concluded due to market uncertainty and newbuilding units scheduled for delivery 1999 onwards. Here we register 14 firm orders so far, outside options and other letters of intent not yet clarified. Similarly, such non renewed units will be redelivered to Bergesen during first half of 1999, thereby increasing the owner's direct involvement and strategy in the trading and chartering markets.

The geographical modification of LPG supplies and new production zones - Middle East Gulf against North / West Africa, North West Europe and South America - will also continue to affect this segment of tonnage, and its ton/mile ratio.

Large LPG carriers 50-60,000 cbm

Some disappointment was the general feeling for this category of LPG carriers, traditionally moving NH3 and LPG. As mentioned above, the slowing down of the intercontinental anhydrous ammonia market has created some upheaval in this area although two ships originally fixed under contracts of affreightment from Black Sea to US Gulf were contracted on a yearly time charter basis at a level of about $625,000 per calendar month. Tough competition was experienced on the LPG long haul trips by the VLGC segment, and the same owner had to pull out a few units from the gas trade to secure lower return employment on clean petroleum product (naphtha). Age of tonnage is becoming important on this ship size, which generated several second hand transactions and on-going discussions for the disposal of older units (Shell and Pemex tonnage 50,000 cbm class).

Second-hand market

After many months of searching and negotiations, Dosco (China) succeeded in taking the "Staffordshire" (75,000 cbm, built in 1977) on bareboat charter for 10 years, the vessel being bought on this occasion for about $23 million by American investors. The "Isomeria" and the "Isocardia" (59,000 cbm, built in 1982), despite a poor charter running until 2002 ($100,000/month on a bareboat basis), fetched $14 and 13 million at the beginning and end of the year respectively from General Electric and Naftomar.

Mid-size LPG carriers 24,000-40,000 cbm

Mixed results on this size segment where performance and flexibility are the governing elements of a smooth employment, and where wider ship controlling structures were extensively developed between the larger shipowners and owning groups.

Bergesen, AP M'ller, Exmar, Bibby, and Hydro entered into time charter agreements resulting in more global operational control for a wider range of tonnage. Some trading pressure came from both the NH3 and LPG "disturbed" spot markets, but healthy rates were achieved on a voyage basis and the yearly results would have been quite attractive had it not been for too much idle time between the loaded legs. Few short and medium term time charter transactions and COA were renewed at an equivalent or slightly lower level than 1997: $650,000 monthly for a performing 35,000 cbm ship whilst a 24- 25,000 cbm could obtain around $500,000 monthly.

20/60,000 cbm Lpg average t/c rates