World News
Drewry: Cheap Oil Boosting LPG Shipping Earnings
Drewry Shipping Consultants Ltd. (Drewry) Wednesday said earnings for the Liquefied Petroleum Gas (LPG) sector had received a boost as a result of the drop in oil prices.
Low oil prices have not triggered a switch away from LPG use by industry, said Drewry, but lower bunker prices are helping to give Time Charter Equivalent (TCE) earnings a boost.
"The implication is that LPG shipping has everything to gain from lower oil prices, despite unfounded fears that this may reduce cargo demand and so damage sector earnings," said Shresth Sharma, Drewry's Senior Analyst for Gas Shipping.
The comments were delivered in Drewry's latest LPG Forecaster publication.
Drewry said the trend was set to continue since 60 percent of LPG use is for residential purposes, demand for which is inelastic to the price of oil, and only 20 percent of the remaining industrial demand is capable of switching away from using LPG.
Conversely, lower bunker prices are having a positive effect on TCE earnings for LPG shippers.
TCE earnings for very large gas carriers (VLGCs) on the Arabian Gulf-Japan route jumped 11 percent in the fourth quarter of 2014 compared to quarter three in spite of falling charter rates.
TCE earnings on North West Europe-East Europe routes are said to have risen 22 percent in the same period, again in the face of falling rates.
In the second half of last year, a number of players ordered fuel efficient LPG carriers, including Navigator Holdings, Astomos Energy Corp., and Stealthgas.
Key Bunker Prices More
| VLSFO | MGO | |||
|---|---|---|---|---|
| $/mt | +/- | $/mt | +/- | |
| Singapore | 655.50 | 2.00 | 808.50 | 4.50 |
| Rotterdam | 619.00 | 0.00 | 789.00 | 8.00 |
| Houston | 628.50 | 7.50 | 812.50 | 1.50 |
| Fujairah | 653.50 | 4.50 | 900.00 | 2.50 |
| Global 20 Ports Average | 672.00 | 0.50 | 885.00 | 7.00 |
| Global 4 Ports Average | 639.00 | 2.50 | 827.50 | 2.00 |
| Global Average Bunker Price | 727.50 | 1.50 | 933.50 | 5.00 |
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