A FULMINANT START FOR LPG STOCKS
Stocks of the Norwegian VLGC owners BW LPG and Avance Gas jumped by approx 10% in the first week of 2020. Remarkably, their US companion Dorian LPG did not follow this move.
The orderbook for VLGCs in 2020 comprises 29 vessels, approximately 10% of the existing fleet. The outlook for the sector depends on whether US propane exports will keep their momentum. Last year, US exports climbed by 74m barrels. Assuming the same absolute increase this year, US export growth would absorb 23 vessels, which leaves six vessels for scrapping, retrofitting or growth in other trade lanes. The recent expansion of US export terminals would support such a bullish scenario. On the other hand, we have to realize that valuations of the VLGC owners have increased strongly and their shares may tend to more volatile trading in 2020.
Crude tanker stocks gained 3.7% on average last week, fueled by rising tensions in the Middle-East, which may cause further friction in the transport chain.
Bulkers lost 2.2% over year-end and we assume that the recent downturn may last a bit longer into February/March. Seasonal patterns predict a low in freight rates at the end of Q1 / beginning of Q2.
Please be reminded that the change in fuel prices due to IMO 2020 will irritate the freight markets at least for some more weeks. Spot rates and TCEs are probably skewed and need to be closely reviewed when evaluating an investment decision. TCEs for vessels with/without scrubbers may differ by up to 25% which needs special attention.
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