Page 45: of Maritime Reporter Magazine (October 1988)

Liquefied Gas Shipping—

New Drewry Report Predicts

Continued Improvement

The liquefied gas shipping indus- try (LNG and LPG) has staged a fairly remarkable recovery in the last couple of years, both in terms of the volume of cargo moved by sea, and the operating profitability of ships involved in these trades. Now, a new Report from Drewry Shipping

Consultants—"Liquefied Gas"— suggests that even better times may be ahead for gas shipping. This optimism is based on a thorough analysis of both market sectors, in- cluding the outlook for the main chemical gases.

Taking LNG first, it is clear that the market has responded positively to the collapse in oil prices in 1986.

Indeed, some significant changes have taken place in pricing formulae and contract terms which have had a beneficial impact on trade. To the extent that several dormant LNG contracts are likely to be reacti- vated, while other existing agree- ments could be expanded. As such, seaborne movements of LNG, which were 87 million cubic meters in 1987, are forecast to rise to 116 mil- lion cubic meters by 1992. Beyond 1992 trade should continue to ex- pand as new exports schemes, such as the Nigeria project, come on stream. Already one major ship operator—Shell—has bought or taken purchase options on seven vessels which are currently idle, and the pool of tankers available for new trades has contracted sharply in re- cent months. In short, the existing

LNG fleet will be unable to cope with the additional demand for shipping services, particularly if im- ports to the United States rise as quickly as forecast. Newbuilding or- ders across the LNG carrier size spectrum therefore cannot be ruled out, and the Report indicates where and when tonnage will be required.

For LPG, the picture is much the same. Seaborne movements have in- creased every year since 1980 (with the sole exception of 1983), rising from 16.3 million tons in 1980 to 27 million tons in 1987. While increas- ing trade is a key factor in the cur- rent buoyancy of the freight market, it is not the whole explanation. At least part of the reason for the improvement in market conditions comes from the supply side, as there has been a conspicuous lack of new- building activity since 1984. Also, the number of companies operating

LPG tankers has contracted sharply and this has been a further factor pushing freight rates in the right direction. For example, time-char- ter rates for a 50,000-cubic-meter ship averaged $490,000 a month in 1987 compared with $350,000 a month in 1986.

In the future, seaborne move- ments of LPG are expected to con- tinue growing because of increasing demand for imported LPG in Japan and the United States. Drewry's fig- ures suggest that trade will grow by 4-6 percent per annum, depending on the year in question, in the peri- od up to 1992. At this rate of increase, newbuildings will be re- quired, as the LPG tonnage surplus declined to a mere 0.5 million cubic meters in 1987, compared with 2.6 million cubic meters in 1984. "Liquefied Gas Shipping—are there

Even Better Times Ahead?" is pub- lished by Drewry Shipping Consul- tants Ltd. and is the fourth in a series of 10 reports produced under the "Seaborne Trade and Trans- port" (STAT) title in 1988. Individ-

Quarterly Timecharter Rates 1Q 1986-1Q 1988 ($'000/month) 75,000 50,000 30,000 12,000 8,000

CUM. CU.M. CU.M. CU.M. CU.M. 1986 1Q 255 265 240 n.a. 180 2Q 207 29 325 227 175 3Q n.a. 420 272 191 150 4Q 558 449 351 260 230 1987 1Q 620 445 336 274 245 2Q 525 442 260 310 288 3Q 506 487 385 303 280 4Q 670 575 n.a. 435 280 1988 1Q 755 n.a. n.a. 440 330

Source: Drewry Shipping Consultants Ltd.

Abbreviated Trade Matrices For LPG : 1987 (Million Tonnes)

Source: West Africa Middle Other Total

Destination Europe East

United States 0.3 1.0 0.4 0.8 2.5

West Europe 4.0 1.6 1.9 0.5 8.0

Far East — 0.4 11.6 1.9 13.9

Other 0.7 0.2 0.5 0.9 2.3

TOTAL 5.0 3.2 14.4 4.1 26.7

Source: Drewry Shipping Consultants Ltd. ual copies of this Report are avail- able at £160 or US$300 (North

America only). Alternatively, the whole series is priced at £590.

For more information on this re- port, contact either Nigel Gardin- er or Paul Dewison at: Drewry

Shipping Consultants Ltd., 11 He- ron Quay, London E14 9YP, Tel 01- 538-0191, Telex 21167 HPDLDN G,

Fax 01-987-9396.

Textron Marine Systems

Wins Navy Contract

New Orleans-based Textron Ma- rine Systems (TMS), Division of

Textron Inc., has been awarded a $2.9-million contract to furnish training equipment for the Landing

Craft, Air Cushion (LCAC) pro- gram, TMS president John J. Kel- ly recently announced. "During the drought of '88, about all that flowed was comm unica tions.''

Gerry Brown

Cargo Carriers, Minneapolis, M/V

To Gerry Brown - to everyone who does business on the river, for that matter - "drought" is a dirty word. It means channels drained to the dregs. Tows stranded up and down the waterway.

Confusion.

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Circle 175 on Reader Service Card

October, 1988 63