2013 was a record year for LPG ordering with 115 contracts signed, up 109% on 2012. So far this year, contracting has been firm with 49 LPG carriers ordered. This month’s Shipbuilding Focus takes a closer look at ordering trends in the LPG sector.

As the Graph of the Month shows, there was a relatively firm level of LPG contracting during the ordering boom, 2005-08, with an average of 86 ships contracted p.a. The global recession saw ordering levels drop and just 25 LPG carriers were ordered in 2009. However, several large series orders contributed to an uptick in contracting in 2010 with 63 units ordered. More recently, ordering in the LPG sector has been supported by a positive trade outlook with growing US exports, increased demand in the Far East and record earnings in 2013 and 2014. As a result, the LPG orderbook is now equivalent to 39% of the fleet in dwt terms ? the highest ratio across the major ship sectors.

The 60,000+ cu.m. VLGC sector saw a considerable upturn in ordering in 2013 with a record 39 units contracted. While ordering in the sector averaged 6 units p.a. 2007-12, in 2013, backed by the expectation of larger export volumes and longer distances associated with the US trade, VLGC contracting rose by 255% y-o-y, and an additional 32 VLGCs have been contracted in 2014 so far. There was also a record level of interest in the 5,000-29,999 cu.m. sector last year with 43 units ordered. A number of these contracts were for ethylene/ethane carriers, with the ethane trade projected to increase alongside US shale gas production (investors are also reportedly now looking at very large ethane carriers). Meanwhile, interest in the smallest LPG carriers (<5,000 cu.m.) has been more muted with 17 ordered in 2013 and no units contracted in the ytd. This compares to an average of 30 ships ordered p.a. 2005-08.

Yards in Korea have typically won the majority of orders for the larger, more complex VLGC units and have taken 91% of VLGC contracts in 2014 to date. Overall, Korean yards have more LPG units on order (100) than shipbuilders in China (47) and Japan (41) combined and account for 70% of the LPG orderbook in terms of cu.m. Japanese builders generally build smaller units (<30,000 cu.m), and between 1996 and 2005 their share of LPG orders averaged 72% in numerical terms. However, greater competition from Chinese yards combined with increased interest for VLGCs has seen their share of LPG contracts fall, averaging 36% between 2005 and 2013. Meanwhile, Chinese builders have seen their share of LPG orders rise from an average of 11% 1996-04 to 27% 2005-13. Whilst yards in China have typically taken orders for smaller units, state owned Jiangnan Changxing has won 11 VLGC contracts since 2012.

So, a positive demand story supported record LPG ordering in 2013. Both the VLGC and 5-29,999 cu.m. sectors saw unprecedented levels of contracting and ordering has remained fairly firm in 2014 so far. With the LPG orderbook to fleet ratio now at its highest level since 2007, it will be interesting to see how the pace of activity develops going forward.

(Source: Clarksons)