The outlook for LPG shipping and trade

According to global LPG shipping company, Dorian LPG, the 12-month period ending in March 2023 was characterised by volatility, influenced by global oil and gas markets, macroeconomic concerns, and specific factors in the LPG trade. As one of the largest owners and operators of modern and ECO very large gas carriers (VLGCs) globally, the company observed a decrease in natural gas prices during the first quarter of 2023, following a period of high prices, thanks to a relatively mild winter.

In February 2023, maintenance activities in the Middle East impacted seaborne exports from Saudi Arabia and the UAE, resulting in a significant increase in Saudi-posted contract prices (CP) for propane and butane. Compared to January 2023, CP for propane rose by US$200 per tonne, while butane increased by US$185 per tonne. However, CP prices decreased in March and April 2023, as exports resumed after the completion of maintenance.

Despite the impact of the late-2022 freeze and weak production economics for NGLs, US production levels remained strong in the first quarter of 2023. Coupled with sufficient propane inventories, propane prices stayed below 50% of the US crude oil price indicator (WTI), resulting in propane exports exceeding four million tonnes in March 2023. Additionally, increased refinery demand in the US for gasoline blending led to higher butane consumption and prices, particularly in February 2023, with exports declining from 1.1M tonnes in January 2023 to 0.7M tonnes.

“The relaxation of lockdown restrictions in China raised expectations for increased demand”

Looking ahead, the relaxation of lockdown restrictions in China raised expectations for increased demand for feedstocks, olefins, and polyolefins, thus improving petrochemical economics globally as product demand returns. However, LPG imports into China did not rise in the first quarter of 2023, with a total of 6.2M tonnes, compared to 7.1M tonnes in the fourth quarter of 2022.

Since the first quarter of 2023, imports have been on the rise, with levels expected to exceed 2.7M tonnes in April 2023, based on current ship tracking analysis. Furthermore, two new propane dehydrogenation plants started operating in the first calendar quarter of 2023 and a flurry of new plants are still expected to come online throughout 2023, leading to the expectation of higher demand for imports in China.

On the supply side, a further 12 new VLGCs were added during the first calendar quarter of 2023, helping to soften freight rates. The company noted the VLGC orderbook stands at approximately 20% of the current global fleet. An additional 70 VLGCs, equivalent to roughly 6.2M m3 of carrying capacity, are expected to be added to the global fleet by calendar year 2026. The average age of the global fleet is now approximately 10.8 years old.

In July 2023, the company announced that it had taken possession of the 2023-built dual-fuel LPG carrier Cristobal, which is the third dual-fuel LPG carrier to join the Dorian LPG fleet on long-term time charter with purchase options. Cristobal will trade in the Helios LPG Pool, which Dorian LPG operates jointly with MOL subsidiary, Phoenix Tankers.