The VLCC market in 2025 is expected to be influenced by both positive and negative factors. While robust LPG trade will support demand, an ample supply of vessels may lead to lower freight rates compared to 2024. Despite fewer vessel deliveries, the overall supply of vessels will remain high, limiting potential rate increases, reports Drewry.
Petchem Demand Recovery Delayed
The recovery in petrochemical demand has been delayed due to persistent negative margins and poor economics. Geopolitical tensions and slowing Chinese economic growth have further dampened demand expectations. Additionally, the cancellation of new PDH plants, especially in China, could negatively impact LPG shipping, as China is a major importer of LPG.
US Terminal Capacity and Geopolitical Factors
US terminals are reaching capacity, limiting growth until new capacity comes online. Geopolitical tensions in the Red Sea, if prolonged, could negatively impact LPG shipping, as shipments may revert to the Suez Canal route. However, stricter US sanctions on Iran could redirect Chinese LPG imports to the US, boosting LPG shipping demand.
Positive Outlook for LPG Trade
Despite these challenges, LPG trade is expected to grow by 2.3% in 2025. Strong Asian demand, increased US and Middle East supply, and the EU’s ban on Russian LPG are driving this growth. Additionally, the growing demand for ethane as a petrochemical feedstock and the increasing focus on ammonia as a clean fuel are expected to boost VLGC and VLAC trade, respectively. However, oversupply of VLACs due to insufficient clean ammonia production may put downward pressure on freight rates.
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Source: Drewry
