The VLGC Carrier Market

Riding the next wave of

change


Nicola Williams
Clarksons Gas Department
IHS Asia LPG Seminar, J une 12-14 2013
www.clarksons.com
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Spot Earnings Volatility & Pricing
VLGC Rates
Freight as % of Landed Costs
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Newbuilding Price Movements

Historical VLGC Newbuilding Prices I nflation Adjusted Newbuilding Prices
Data Source: Clarksons
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Forward VLGC Fleet Development
Fleet Sized >60,000 cbm
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MARPOL Annex VI
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
S
u
l
p
h
u
r

C
o
n
t
e
n
t

(
%
)

SECA/ECA
Global
EU Sulphur
Directive ~
Revised Annex VI
entered into force in
J uly 2010 introducing
ECAs
Entered into force
in May 2005
Additional rules for all
ships at berth in EU
ports from J an 2010
Data source: IMO/ EU
* 2020 global reduction may be delayed subject to feasibility study
~ For inland waterway vessels and ships at berth in European Community ports,
Impact of Regulatory
Changes


Up to 3 different grades of
bunker fuel required in some
trades

Not considered technically
feasible to reach level of 0.1%
sulphur with heavy fuel oil
implies use of gasoil

Price differential

Potential costs to adapt
engine room

Scrubbers may be used to
reduce the SOx emissions

LNG as a fuel
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Fuel Savings Eco Newbuildings

Assessed Annual Bunker Cost Savings
Fuel efficiency gains in newbuildings
expected to impact trading
economics

Strong financial incentive in an
environment of high oil/bunker
prices & impending change in
Regulations

Developments expected to impact
bottom-line $ pmt economics. Could
we see a two-tier freight market
developing?


Based on a 5 Mt/ day Fuel saving
Data Source: Clarksons

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LPG Pricing


Propane Pricing Butane Pricing
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US Export Volume Growth Terminal Exp.
Source: Clarksons
Estimated Export Capacity as of end Year (Maximum Capacity)
+3.5-4.5
+2.3-3
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US Gulf VL/LGC Liftings by Destination
2012/13 Liftings
In 2012, approx 12% of the volume found a home East of Suez
Arbitrage Movements
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3.9
5.9
2.1
4
2.6
Vessel Demand Sensitivities for Load/Disport Alternatives
2.5
2.1
2.8
Load Discharge via Est.Total Days RV (inc in Port, Bunker & Canal Transit Time) 1 M MTPA = VLGC equivalent
US Japan Panama 62 3.9
US Japan via Cape of Good Hope 94 5.9
US N.W.E 34 2.1
US Chile Panama 33 2.1
US Brazil 39 2.5
W.Africa Chile 44 2.8
W.Africa Japan via Cape of Good Hope 64 4.0
AG Japan 41 2.6
Sensitivities of Shipping Demand by Source of Origin/Destination
Panama Expansion Impact on Vessel Demand
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On Purpose Petchem Production Growth
Planned Projects by Volume & start-up date

New Propylene Dehydro capacity
should provide a boost to Propane
Demand
Some of this will translate into
additional import demand in Asia, most
notably in China
PDH also more appealing in the US as
Propane availability rises (due to shale
production) and as prices are more
competitive. Increased use of Ethane
as a steam cracker feedstock is also
tightening Propylene supply

Source: Clarksons, ICIS & industry announcements
N.B includes projects under study/planned
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Deficit/Surplus of
Vessels (LHS)
Global Seaborne LPG Trade Outlook
Exports by Region I mports by Region
Data Source: Clarksons
Export Sensitivity to
I ranian Volumes
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Growth East v West Arbitrage Potential
Demand/ Supply East Demand/ Supply West
Note Based on current regional growth projections
Source: Clarksons
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Vessel Deficit/ Surplus by Year
Data Source: Clarksons
VLGC Demand/Supply Balance
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