Long-term freight rates to rise for LPG carrier fleet, report says
A report released today by Ocean Shipping Consultants on the worldwide liquefied petroleum gas carrier market estimates that freight rates for LPG carriers will rise steeply until 2009, drop off, then rise again through 2015.
'One-year time charter rates for VLGCs (very large gas carriers) are forecast to fall in the near-term, but recover by 2009. There is likely to be a market 'correction' around 2010, followed by a fall in rates with a subsequent recovery,' the report says.
The report said total profitably in the sector will also rise, despite what's expected to be a 22 percent hike in vessel operating costs by 2010. That will likely be fueled by demand that is expected to outstrip fleet capacity.
LPG trade is forecast to increase from 48 million tons in 2004 to 68 million tons by 2010 and to 96 million by 2015. But fleet capacity is forecast to grow more slowly, from 14.5 million cubic meters in 2004 to 18.6 million by 2010 and 24.6 by 2015.
Eighty-eight vessels, totaling 3.6 million cubic meters of capacity, are on order this year — equivalent to 24 percent of the current fleet. More than three-quarters of those new vessels will be built in South Korea shipyards, with Japan building another 17 percent.
The report said that predicted undulations in freight rates and demand over the next decade will likely affect the sector's operating profitability.