VLGC – Significant Increase in Net Fleet Growth Putting Pressure on Earnings
Feb. 24, 2023
On a global basis, our proprietary calculations of ton-mile demand reveal another strong year of growth for global LPG transport demand to 657 billion ton-miles for 2022, a 5.3% year-on-year increase after a 12.1% jump just a year ago (Figure 1). Ton-mile demand originating from the US Gulf region has been the primary contributor to VLGC demand over the last few years, although our models point to a more modest growth after 2024. The Middle East is also expected to add LPG length till 2027 although exports are likely to head to the Indian subcontinent instead of the Far East, resulting in less ton-miles.
Figure 1 – LPG Carrier Ton-Mile Demand (Top 10)
Source: McQuilling Services
Strong demand growth in 2023 will be offset by the highest number of VLGC newbuilding deliveries on record. This, combined with low anticipated deletions (historical avg. age of VLGC deletions = 30), will result in a significant increase in net fleet growth. We project the VLGC fleet to expand on average 5.4% per annum during the forecasting period compared to a 2.3% annual growth rate on the ton-mile demand side, suggesting pressure on LPG freight rates especially for 2023 and 2024.
Figure 2 – Demand/Supply Outlook
Source: McQuilling Services
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