Increasing LPG exports from the U.S. due to rising production of shale gas has resulted in increasing demand for very large gas carriers
(VLGC). These gas carriers are used for transporting LPG and have a capacity of approximately 82,000 cubic meters. With the increasing demand of LPG from developing economies the demand for large carriers is also increasing to optimize the logistics cost and increase profitability margins.
The enlarged Panama Canal is projected to open in late 2016; this would decrease the transit route between North America and Asia Pacific region. The trade between the U.S and Asia Pacific region is anticipated to increase at a rapid pace owing to the decrease in transportation costs. High LPG prices in the Middle East restrained Asian consumers to buy LPG from this market leading to increased demand from the U.S. market. The U.S shale gas revolution is the primary game changer for the increasing demand for very large gas carriers. Freight rates of VLGC’s are expected to increase at a rapid rate owing to the opening of the enlarged Panama Canal.
The increasing demand for LPG especially in the Asia Pacific region is the primary driver bolstering the demand for very large gas carriers. The energy hungry countries such as Japan, China and India are the major centers for LPG imports. The widening of the Panama Canal in North America would further enhance the demand for these large carriers. Taking into account the route between North America and Far East, the widening of the Panama Canal will reduce the cost of transportation to a huge extent.
This would increase the U.S. exports to the Asia Pacific region. This increasing demand of clean fuel sources would encourage the construction of VLGC’s. The cost of crude oil is increasing at a rapid rate, thus the developing economies are looking for cleaner sources such as LPG to fulfill their energy needs. This increasing demand from developing Asia Pacific region would encourage the shipping companies to construct very large gas carriers. However the market for LPG is still unpredictable and though the demand for LPG will certainly increase in the short term, the long term trend is still uncertain. This uncertainty in LPG demand and the increasing fuel prices could hamper the demand of very large gas carriers.
The rising demand of LPG in Asia Pacific region makes it the most attractive market for very large gas carriers. North America would be the major player in the LNG trade market in the future, thus a majority of the shipping companies in the U.S has placed orders for construction of these very large gas carriers. The Middle East region is also one of the major exporters of LNG, which would provide further growth opportunities for the VLGC market.
The European shipping industry is also recovering from the global economic crisis of 2008. The shipbuilders in Europe have now slowly started taking orders for new constructions. Moreover the rising demand of LPG due to strict environmental regulations could lead to increase in demand for large LPG ships in this region. Rising LNG exports from Russia and South American nations could also augment the demand for very large gas carriers.
Some of the major market players operating in this market are Exmar, Dorian LPG Ltd., Shandong, Dorian Hellas S.A., Pertamina Gas, Navigator Holdings Ltd. and Great Eastern Shipping Company.