BW LPG Positive about Market Outlook for 2015

Very large gas carrier (VLGC) owner and operator BW LPG is reaping the fruits of historically high rates on VLGC market during 2014, driven by continuing expansion of US export volumes of LPG mainly to Asia.

The company’s business results for the third quarter show that time Charter Equivalent (TCE) earnings increased to USD 159.2 million in Q3 2014 (USD400.5 million YTD September 2014), from USD 75.9 million in Q3 2013 (USD187.0 million YTD September 2013).

According to BW LPG, the growth in global supplies of LPG are driven mainly by US shale-gas projects. New outlets of retail and industrial demand are developing as buyers seek to benefit from the expectation that LPG grows as an abundant and competitively priced fuel and petrochemical feedstock.

In addition, Asian import growth has been particularly beneficial to the VLGC market due to long transport distances.

The company’s net profit after tax reached USD 87.5 million in Q3 2014 (USD190.7 million YTD September 2014) compared with USD 68.9 million in the same period last year, mainly due to stronger TCE earnings, additions to fleet and a write-back of previously recognised impairment charges of USD42.9 million in Q3 2013.

“We have not yet seen corresponding increases in VLGC tonnage availability, so the market has been tight through most of 2014, and seems likely to continue to remain tight until significant new VLGC deliveries arrive in late 2015,” the company said.

Speaking of the outlook, BW LPG said that the resultant increase in shipping tonnage required is gradually being met by a large orderbook of newbuild VLGCs, many of which will deliver by late 2015.

“This expansion in VLGC tonnage creates the prospect of oversupply, albeit potentially temporary, during which time some reduction in rates would be natural. Therefore the market outlook for 2015 remains positive, with potential for rates to retreat somewhat due to oversupply in 2016. Beyond 2016, expanding US production and export capacity provide potential for continued export growth.

New demand is essential to realizing these exports which would help to absorb excess tonnage. There is always the prospect of additional newbuild ordering, however, in particular for delivery from early 2017, which could extend or worsen an over-supply situation.”

BW added that the market for ethane transportation remains interesting, and forecasting that a small fleet of Very Large Ethane Carriers (‘VLECs’) is likely to be built in the coming years.

Press Release

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