China's LPG shipping capacity likely to go up 70% by 2010

Friday, 13 March 2009

China's domestic LPG shipping capacity, or ship storage space, is expected to increase around 70% or 70,000 mt to 170,000 mt by 2010, compared with 100,000 mt in 2008, a senior official with the LPG Transport Committee of the Chinese Ship Owners' Association said last Friday.

However, China will not need this additional LPG shipping capacity in 2010 because of falling demand, the official added.The additional capacity is coming from 47 new ships, which will be put into service over 2009-2010. During this period 14 old ships will be scrapped.The 47 new LPG ships have a total storage capacity of 81,000 mt, while the 14 to be scrapped have a storage capacity of around 11,000 mt.

China consumed 21.5 million mt of LPG in 2008, down 2 million mt or 8.5% from 23.5 million mt in 2007, the first fall in 18 years, according to data from Sinopec.The LPG volume to be transported by ships within China in 2010 is estimated around 4.2 million mt, up 24% from the 3.4 million mt shipped domestically in 2008, according to the official."The 4.2 million mt is simply not enough to make the LPG shipping business profitable given the increase in shipping capacity," the official said.

In order to make the shipping business profitable, the LPG volume should at least be 7 million mt, he added. "That means if all the ships are launched as scheduled, there will be a surplus of shipping capacity in 2009-2010." Profitable LPG shipping operations in 2007, coupled with a fall in ship building costs in the second half of 2008, encouraged LPG shipowners to order new vessels for launch in 2009-2010, the official said. "The association has suggested to LPG shipowners they delay new ship launch dates to avoid losses, but have not heard about any prompt action from them," he said.

Source: Platts