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8

BW LPG

MARKET AND

BUSINESS REPORT

Growth in demand for LPG remained

particularly strong in Eastern markets

as a result of strong retail growth in

India and Indonesia and petrochemical

demand in China.

Chinese seaborne LPG demand grew by

an estimated 60% in 2014 to 6.8 metric

tons. Three propane dehydrogenation

(“PDH”) plants came into operation in China

during 2014, with a further plant under

commissioning in the first quarter of 2015.

There are now five PDH plants operating

in China with additional plants expected

to come into operation in 2015 and the

potential for capacity extensions at existing

plants over time.

Elsewhere in Asia, importers of LPG

increasingly sourced their product from

the US and West Africa, displacing

volumes traditionally imported from the

Middle East. This has had a substantial

impact on demand for shipping with

average round voyage durations rising

from 45 days to 110 days.

BW LPG’s fleet utilisation averaged 98%

in 2014. This is achieved through a strong

commercial platform and long-standing

agreements with many of the world’s

largest charterers in the LPG space.

The fall in crude prices has led to a

corresponding reduction in the price of

fuel oil used to propel the vessels. Fuel oil

costs were approximately $625/tonne in

January 2014 and are recently $320/tonne,

contributing to a reduction in voyage costs.

These savings are achieved on the portion

of the fleet deployed in the spot market

and on some contracts of affreightment.

Under time charters, the charterer bears

fuel pricing risk and therefore benefits from

the fuel cost reduction.

The Panama canal expansion project is

expected to enable transit of larger vessels

by late 2016 or early 2017. Until then only

Panamax VLGCs, some LGCs and smaller

vessels can transit the Panama Canal;

resulting in a longer voyage for most of the

global VLGC fleet. Strong market conditions

have therefore benefitted the LGC fleet as

the economics of a smaller cargo but a

shorter voyage duration improve when day

rates are higher.

Source: BW LPG based on terminal owner / developer published estimates

0

10

15

5

25

35

20

30

40

2013

Q4

2014

Q1

2014

Q2

2014

Q3

2014

Q4

2015

Q1

2015

Q2

2015

Q3

2015

Q4

2016

Q1

2016

Q2

2016

Q3

2016

Q4

2017

Q1

(Millions of tonnes/annum)

FIGURE 3 |

ESTIMATED US LPG EXPORT CAPACITY (EXISTING AND PLANNED)

FIGURE 2 |

STRONG ASIAN DEMAND

Note:

Japan, South Korea, India, China, Indonesia,

Vietnam, Philippines, Taiwan, Thailand.

2012

2013

2014

30

32

34

36

38

40

42

44

LPG IMPORTS (MMTPA)

Source: Customs data of respective countries,

BW LPG estimates