BW LPG says Weak Market Condition to Remain in Third Quarter as it Reports Lower Second Quarter Results

EBITDA for the second quarter amounted to US$39.6 million (Q2 2016: US$52.3 million), a decrease of US$12.7 million from the same quarter last year mainly due to a decline in LPG spot rates.  Loss after tax amounted to US$7.0 million.  The loss of US$55.6 million in the same quarter last year was mainly due to an impairment charge on vessels and available-for-sale assets of US$76.4 million while there was no impairment charge in the current quarter.

VLGC rates averaged US$28.8 per ton on the benchmark Baltic route, nearly halving to US$21 per ton after starting the quarter at US$36 per ton. The weakness in freight was driven by worsening arbitrage economics leading to substantial cargo cancellations in the U.S. Gulf Coast and continued above-average fleet growth.

Heading into the third quarter, there has been an uptick of fixtures on the long-haul US to Asia route going via the Cape of Good Hope (the longer route) rather than via the Panama Canal. However, this positive development on the distance side of the shipping demand equation is continuing to be partly offset by the adverse impact of U.S. cargo cancellations.

In July 2017, the Company signed a contract to sell VLGC BW Vision. The sale is part of the Company’s fleet renewal strategy. The vessel is expected to be delivered in September 2017.

On 27 July 2017, the Company and Global United Shipping India Private Limited have agreed to establish a joint venture in India, BW Global United LPG India Private Limited, in which the parties will own 50% each. The purpose of the new joint venture is to own and operate a fleet of VLGCs for the transportation of LPG within Indian waters. As part of the establishment, the Company has entered into an agreement to sell two of its VLGC vessels, BW Boss and BW Energy into the joint venture. The joint venture is expected to be fully operational by the end of 2017.