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
(Millions of tonnes/annum)
FIGURE 3 |
ESTIMATED US LPG EXPORT CAPACITY (EXISTING AND PLANNED)
FIGURE 2 |
STRONG ASIAN DEMAND
Japan, South Korea, India, China, Indonesia,
Vietnam, Philippines, Taiwan, Thailand.
LPG IMPORTS (MMTPA)
Source: Customs data of respective countries,
BW LPG estimates