Drewry expects volatility to persist in LPG shipping in 2026, amid a surging fleet, concerning petchem demand as well as slow (yet resilient) global economic growth and some geopolitical events overshadowing the expected rebound in trade. Accordingly, VLGC TC rates are expected to fall 5% in 2026, averaging $40,000pd. However, the drop is moderate compared to the 20% decline seen in 2025.

Improved trade expectations could lend support—but will it be enough?

The LPG trade is projected to rise 6% in 2026, supported by higher exports from the US and the Middle East. Asia will remain the demand centre, with the US–China 12-month tariff truce expected to boost LPG trade between the two countries (albeit US LPG is still under 10% retaliatory tariffs by China).

The truce has improved market sentiments and will pull back Chinese buyers to the spot market, but uncertainty remains over whether the truce will hold through November 2026. The trade policy between the two countries will be a major swing factor for the market in 2026.

Other Asian countries are also likely to increase their imports of US LPG and other energy commodities as part of the tariff deals signed during 2025. India’s imports of 2.2 million tonnes of LPG from the US under the recently signed agreement will also provide additional support. Meanwhile, the Middle East has been aggressively lowering its prices to compete with US cargoes and thereby attract term contracts from Asian buyers in 2026.

“The trade pattern (with export options) will be major factor that will impact the tonne-mile demand in 2026.”

Any bright spots to be eclipsed by China’s demand concerns

China’s LPG demand is likely to rise next year, but will face headwinds, such as muted downstream demand, low profitability in the petchem sector and volatile trade and geopolitical policies, which will affect trade flows and commodity prices.

Meanwhile, LPG demand for PDH and steam crackers is expected to diverge, with PDH operations increasing LPG consumption and steam crackers reducing LPG intake. Shrinking margins are forcing some steam cracker units to reduce production or consider shutdowns, with growing competition from the PDH sector.

Flexible steam cracker units are expected to switch to alternative feedstocks, such as naphtha and ethane, which will impact LPG demand. Meanwhile, residential and commercial LPG demand continues to decline due to higher gas consumption, electrification drives and an increase in renewable power generation.

“China’s trade policies and its petchem sector’s performance will have a direct impact on the performance of LPG shipping in 2026.”

Surging fleet growth to drag down 2026 VLGC earnings 

Fleet growth is likely to surge from 2026 as the current orderbook shows 98 vessels slated for delivery in 2026, including 21 VLGCs and 10 VLACs. This influx of new tonnage will exacerbate the supply–demand imbalance, exerting downward pressure on LPG shipping rates. Asian LPG demand is expected to remain strong, particularly in China and India, but not strong enough to absorb the excess vessel supply, weakening rates.

“Fleet expansion was moderate at 4% in 2025 (following 6% in 2024). However, it is expected to accelerate to 7% in 2026 and peak at 16% in 2027 as deliveries surge for VLGC/VLAC and ethane carriers.”

An anticipated rise in dry-docking activity in 2026, with increased transits from the COGH, could support the absorption of excess tonnage, helping to mitigate oversupply pressures. Acceleration in scrapping is unlikely, as vessel earnings remain healthy, with market uncertainties and changing trade policies incentivising owners to retain their older tonnage.

Various geopolitical risks continue to be key swing factors

1. Sanctions on Iranian LPG exports are expected to remain in place, but in the unlikely event of the sanctions being rolled back, 50–60 VLGCs currently operating in the shadow fleet could re-enter the regular market. While this would temporarily depress earnings, the re-introduced vessels are largely older and less efficient, which may limit their commercial viability and potentially trigger a wave of scrapping.
2. Middle East—stable or volatile? Political tensions in the Middle East, such as the Iran–Israel tensions, the Saudi Arabia–Iran discord, the Yemen conflict and regional sanctions, affect LPG production volumes, exports and shipping security, in turn, impacting LPG supply and arbitrage.
   The escalation of geopolitical tensions in the Middle East, particularly around the Strait of Hormuz, remains a low-probability risk, but if it were to occur, the impact could be severe. Given the strategic importance of this chokepoint, any disruption would have significant implications for global LPG flows, although such an escalation is currently deemed unlikely.
3. OPEC+ policy swings: OPEC+ has planned to pause production hikes in 1Q26 in anticipation of a looming oil supply surplus that is driven by faster-than-expected non-OPEC supply growth and weaker-than-expected demand from key consumers, including China. This could ease the Middle East’s LPG export growth.
4. Normal transits through the Suez Canal: In November 2025, the Houthis announced a suspension of maritime attacks and lifted their self-declared blockade on the Red Sea, raising hopes for recovery in transits through the passage. However, as shipping companies remain cautious, the revival in transits is expected to be slow and gradual.
   Source: Drewry