LPG newbuild ordering hits record high, but will the momentum last in 2025?

Interest in MGC gains traction

MGC orders have skyrocketed this year and now stand at a record high of 34 orders; just like VLACs, the momentum from 2023 has rolled into 2024. MGCs offer versatility to shipowners as they can be used for LPG, ammonia and olefins/ethane (specialised carriers). The segment has an orderbook with 63 vessels, accounting for 45% of the current fleet.

“There are now 55 VLACs on the orderbook”

MGCs are rapidly adopting dual-fuel propulsion, with 83% of the orderbook comprising dual-fuel engines. LPG as an alternative marine fuel remains the favourite option, but interest in ammonia is also picking up, with 13 vessels on the orderbook.

As clean ammonia volumes will be low until the end of the decade, MGCs are touted as the first vessels to be used. Meanwhile, a higher return on investment (ROI) and versatility than VLGCs is stoking orders for MGCs.

The rare LGC orders

After nearly a decade, the first LGC order was recorded in 2024, with Eastern Pacific Shipping (EPS) ordering four LGC carriers. The LGC segment is used in niche areas and for long-haul ammonia transportation. With only 21 vessels in service, the segment is waning. The EPS order is expected to be a replacement tonnage as the company has three 15-year-old LGCs already in service. Moreover, Vietnam’s Asia Pacific Shipping followed up with a two-vessel order, taking the tally to six vessels.

Although Drewry does not expect a surge in LGC orders, a few may materialise with potential for clean ammonia trade and interest from smaller shipowners who might opt for the much higher priced VLGC/VLAC.

Initiation of ULECs

While 31 VLECs were ordered in 2023, just 12 newbuilds were ordered as of Q3 2024. Meanwhile, ethane cracker operators like China’s Satellite Chemicals have upgraded the vessel sizes by ordering six ultra-large ethane carriers (ULECs), followed by another two through Eastern Pacific Shipping in October, all on long-term charters. The orderbook-to-operations ratio for ethane carriers stands at a whopping 220%, with 60 vessels on order against 27 in service.

The rise in demand for ethane as a cheaper feedstock for petchem plants has supported new orders. Higher ethane production, associated with record-high natural gas processing in the US, has increased the economic benefits of using the commodity for cracking. Ethane cracker plants have emerged in many countries and are operational in India, China and Europe, with more crackers in the pipeline. Furthermore, weaker petchem margins with volatile LPG and naphtha prices also compel operators to convert their existing crackers to ethane.