Despite concerns about a glut from 2027, the expected growth in the pure ammonia trade will keep new orders for LPG vessels high, according to Drewry analysis.
The newbuilding activity has been expanding with 121 orders placed in 2024 so far compared to 122 vessels ordered in 2023. The surge is primarily driven by the interest in Very large ammonia carriers (VLACs) and Very large ethane carriers (VLECs), while other segments also report record orders. Drewry has analysed key factors, which have supported this uptick in orders.
Although ammonia is already transported through LPG carriers, the volume is low, limiting the trade to the smaller large gas carriers (LGCs, 50-70 kcbm) and Medium gas carriers (MGCs, 30-50k).
The uptake of clean ammonia in the existing import markets will require subsidies and incentives. Therefore, Drewry expects the clean ammonia trade to reach 8-10 million tonnes by 2029. So far, 34 VLACs were ordered compared to only nine VLGC orders in 2024. There are now 55 VLACs on the orderbook, while the VLGC tally is 40.
The newbuild price for a VLAC is around $120-125 million, which is quite high, deterring shipowners. However, owners are opting for costly ammonia carriers over VLGCs to reach the decarbonisation goal.
MGC orders have skyrocketed this year and stood at a record high of 32 orders so far; just like VLACs, the momentum from 2023 has rolled into 2024. MGCs offer versatility to shipowners as they can be used for LPG, ammonia and olefins/ethane (specialised carriers). The segment has an orderbook with 63 vessels, accounting for 45% of the current fleet.
MGCs are rapidly adopting dual-fuel propulsion, with 83% of the orderbook comprising dual-fuel engines. LPG as the alternative marine fuel remains the favourite but the interest in ammonia is also picking up, with 13 vessels on the orderbook.
As clean ammonia volumes will be low until the end of the decade, MGCs are touted as the first vessels to be used. Meanwhile, a higher ROI and versatility than VLGCs is stoking orders for MGCs.
After nearly a decade, the first LGC order was recorded in 2024, with Eastern Pacific ordering four LGC carriers. The LGC segment is used in niche areas and for long-haul ammonia transportation. With only 21 vessels in service, the segment is waning. The Eastern Pacific order is expected to be a replacement tonnage as the company has three 15-year-old LGCs already in service. Moreover, Vietnam’s Asia Pacific Shipping followed up with a two-vessel order, taking the tally to six vessels.
Orders for VLECs soared, with 31 ordered in 2023 compared to 12 until 3Q24. Meanwhile, ethane cracker operators like China’s Satellite Chemicals have upgraded the vessel sizes by ordering six Ultra-large ethane carriers (ULECs), followed by another two through Eastern Pacific Shipping, all on long-term charters. The orderbook-to-ratio for the ethane carriers stands at a whopping 220%, with 60 vessels on order against 27 in service.
