The small and compact size LPG vessel segment is expected to be the best
performer in terms of attracting traffic during the forthcoming year 2018 while
handysize vessels will be the worst hit according LPG forecaster published by
the global shipping consultancy firm Drewry
The LPG shipping market is currently oversupplied with vessels (with the
exception of the small segment of 1,000-5,000 cbm), as a result of strong fleet
growth during the last three years. The global LPG fleet expanded at an annual
average rate of 17 per cent in 2015 and 2016, and is expected to grow by 9 per
cent in 2017. However, shipowners can now breathe a sigh of relief as fleet
growth is set to slow down to 5 per cent in 2018 and 3 per cent in 2019,
As growth rates vary among size segments, Drewry has looked into the
freight rate prospects of different size category of vessels and believes that
Handysize ships (12,000-25,000 cbm) will be the worst performers in 2018, while
small LPG vessels (1,000-5,000 cbm) will be the best. Fleet growth will be the
main catalyst for their freight rate outlook.
Ample supply will keep charter rates under pressure, as the expansion of
long-haul LPG trade will tend to favour VLGCs and MGCs. Moreover, the Olefin
gases trade will not be strong enough to keep all Handysize vessels employed.
By contrast, fleet growth in the small LPG vessel category will be negative on
the back of a thin order book and expected demolitions, which will support freight
rates for this segment.
In absolute terms, VLGCs have the highest EBITDA, while small coasters have
the lowest. However, in order to make a better comparison, we have calculated
the payback period, based on the price of a five-year old vessel in each segment
and our EBITDA forecast for next year," commented Mr Shresth Sharma,
senior analyst for gas shipping at Drewry.
Our estimates point out that the small LPG segment will return the
investment in eight years, while in the Handysize segment it will take 19
years," he added.