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Gas Beating Oil in Shipping Market as Consumers Expand Stockpiles: Freight

20 Oct 2011

Record liquefied-petroleum-gas shipments are eroding a glut of the tankers hauling the fuel used in stoves, cars and lighters, driving charter rates to the highest ever at a time when most other ships are losing money.

Seaborne trade in LPGs will advance 7.9 percent to 60.2 million metric tons this year, led by supplies from Qatar, according to Knut Stangebye Olsen of Lorentzen & Stemoco A/S, a shipping consultant. Monthly rental costs will exceed the previous record of $1.27 million by next year’s third quarter, from $900,000 now, said the Oslo-based analyst, a former manager at BW Gas Ltd., the largest owner of the vessels.

The surge in supply is a consequence of expanding natural gas output and oil refining, which produce LPGs as a byproduct. While returns on the biggest ore carriers fell 87 percent in the past three years and owners of some of the largest crude tankers are paying clients to hire their vessels, LPG ship rates almost doubled this year. Gas supply expanding at more than twice the pace of the fleet means analysts anticipate profit at Exmar NV (EXM), an operator of the tankers, will almost double this year.

“We don’t have a lot of vessels available for spot cargoes,” said Diego de Potter, a chartering official at Antwerp, Belgium-based Exmar, whose fleet of 30 ships can hold enough gas to supply China for more than a month. “If you ask me for a charter in six weeks, I will not even bother to give you a freight rate.”