Inefficiencies, Freight Rates Grow as Middle East Conflict Hikes US Exports: BW LPG
The U.S. Gulf-East Asia arbitrage has supported increased trade flows, amid a lack of Middle Eastern product, with importers increasingly reliant on the U.S. for available volumes, which has ramped up freight rate costs, New York-and Oslo-listed shipowner BW LPG noted in its quarterly results on Friday.
As a consequence of the greater trade flows between the U.S. and Asia, market inefficiencies – vessels travelling further for replacement cargoes – and VLGC ton mileage have firmed, supporting freight rates.
The OPIS Houston-Chiba VLGC spot freight rate averaged $246.71/metric ton in the second quarter, compared to $150.20/mt in Q1 and $110.46/mt in Q2 a year earlier.
From a trade flow perspective, India accounted for the largest increase, with U.S. liquefied petroleum gas (LPG) exports to India rising 212% compared with the first half of 2025, BW LPG noted. While shipments from the U.S. to China recovered in the first six months of the year – increasing by 2%.
Possible conflict resolution, Panama Canal disruption
In Southeast Asia, while the region has historically sourced most of its LPG from the Middle East, it has increasingly diversified towards U.S. in recent years. Imports from the U.S. increased 31% compared with the first half of 2025.
Looking ahead to remainder of the year, BW LPG noted that spot earnings are expected to remain sensitive due to geopolitical developments and disruption to global trade patterns.
Assuming conflict resolution in Q3, Middle Eastern LPG exports will recover, however, a fully recovery is expected to take between 12-36 months, depending on local conditions and infrastructure damage, according to the shipping company. Therefore, it is likely that North American supply will continue to grow, supported by new export infrastructure and an increase in gas-rich oil production from the Permian basin.
Citing data from shipping analytics provider Vortexa and data from consultancy NGL Strategy, BW LPG showed North American LPG exports on VLGCs up 16% year on year in the first half of 2026, with forecasts indicating the growth could reach 18% for the full year. While VLGC exports have climbed on the year in North America, VLGC exports are down 46% out of the Middle East in January-June.
Flexible terminals have also supported LPG export growth so far this year, but this is expected to change with units pivoting more towards ethane exports in the coming years. Nonetheless, stand alone, dedicated LPG export capacity continues to expand, with much of the new capacity already contracted.
The firm also noted that more VLGCs could head to Asia via the Cape of Good Hope instead of the Panama Canal with transits sensitive to the El Niño drought and lower water level restrictions at present.
There has been an increase in competition for slots at the Panama Canal from various segments, and with that fees have rallied to hit all-time highs. South Korea’s SK Gas paid a record transit fee of $5.261 million at the Panama Canal’s Neopanamax auction for a northbound slot on Sept. 1 for its VLGC G. Spirit, surpassing the previous highest transit fee, which it also paid, of $4.6 million.
Looking further ahead, demand for Panama Canal transits is expected to increase as additional liquefied natural gas, ethane and LPG carriers enter service, BW LPG noted.
From the VLGC segment, new deliveries are being increasingly offset by fleet replacement needs. A total of 27 VLGCs and Very Large Ammonia Carriers (VLAC) have been delivered so far this year, with 13 more expected by year end. The orderbook currently stands at 155 VLGC/VLACs, equivalent to 35% of the existing fleet, with deliveries scheduled through the fourth quarter of 2030.
Profits rocket on Middle East conflict
BW LPG posted $137.9 million in net profits in the second quarter, up from $43.4 million a year earlier. And in the first half of the year, net profits reached $325.3 million, from $110 million in January-June 2025.
Income from time charter equivalents (TCE) for shipping totaled $274.9 million in April-June, representing an increase of $122.2 million a year earlier. TCEs averaged $74,500 per available day and $71,600 per calendar day in the second quarter.
The firm is also in the process of refreshing its fleet. BW LPG placed an order for eight VLGCs with South Korean shipyard Hyundai Heavy Industries (HHI) in a contract worth $940 million on May 30. The eight 90,000 cubic meter Panamax-class VLGCs are expected to be delivered sequentially from the start of 2029 until the second quarter of 2030.
It also sold the 2007-built BW Elm and BW Birch, generating net book gains of approximately $36 million and $37 million, respectively. BW Elm was delivered in July, and BW Birch is expected to be delivered by mid-November.
More recently, the firm sold the 2015-built BW Levant, a vessel acquired in the Avance Gas fleet takeover deal, for a net book gain of $17 million. The vessel is scheduled to be delivered to the buyer by mid-November.
Reporting by Jamie Aldridge, jaldridge@opisnet.com; Editing by Rob Sheridan, rsheridan@opisnet.com