Major Turnaround In LPG Shipping By forex cargo shipping rates? However, the projected growth in demand for seaborne LPG trade is impressive.
I believe this growth will turn the market from oversupplied to very tight within the next 12-18 months. Investors who act now, while valuations remain depressed, have an opportunity to generate outsized returns through 2018-2019. Note: This article was originally published as a guest article April 20th on Value Investor’s Edge, a Seeking Alpha subscription service. LPG shipping has shown very large growth rates over the past couple of years, but an overbuild of vessels, with deliveries scheduled between 2014 and 2017, has resulted in an oversupplied market and low day rates.
The normal article layout would be an overview of market dynamics with a conclusion at the end of the article. However, this time, I reversed it because I think the outcome of my simple market model will induce a heightened level of investment interest. The graph pictures the total global fleet of VLGCs, with currently around 250 vessels on the water. The red line shows my approximation off the demand for these ships. Currently, the market is severely oversupplied, and to make matters worse, there is still a fairly large number of deliveries left in 2017. I did not include any non-delivery or slippage.
Including that would only make the picture more optimistic. I expect that people would think these numbers are wildly optimistic. The most important input variable is the tonne mile growth rate. In the remaining of the article, I will try to give a full market overview and show why I believe these input variables are quite realistic.
2016, which was a slowdown from 2014-2015 growth. The first clue about what is happening in the graph is the quick appearance of the U. LPG exporter due to the shale oil boom. The setup for LPG shipping was amazingly good since 2012, with huge growth of tonne mile and the potential for giant profits for shippers.