Record liquefied-petroleum-gas shipments are eroding a glut of the tankers hauling the fuel used in stoves, cars and lighters, driving charter rates to the highest ever at a time when most other ships are losing money.

Seaborne trade in LPGs will advance 7.9 percent to 60.2 million metric tons this year, led by supplies from Qatar, according to Knut Stangebye Olsen of Lorentzen & Stemoco A/S, a shipping consultant. Monthly rental costs will exceed the previous record of $1.27 million by next year’s third quarter, from $900,000 now, said the Oslo-based analyst, a former manager at BW Gas Ltd., the largest owner of the vessels.

The surge in supply is a consequence of expanding natural gas output and oil refining, which produce LPGs as a byproduct. While returns on the biggest ore carriers fell 87 percent in the past three years and owners of some of the largest crude tankers are paying clients to hire their vessels, LPG ship rates almost doubled this year. Gas supply expanding at more than twice the pace of the fleet means analysts anticipate profit at Exmar NV, an operator of the tankers, will almost double this year.

“We don’t have a lot of vessels available for spot cargoes,” said Diego de Potter, a chartering official at Antwerp, Belgium-based Exmar, whose fleet of 30 ships can hold enough gas to supply China for more than a month. “If you ask me for a charter in six weeks, I will not even bother to give you a freight rate.”

Negative Returns

Costs for spot cargoes on the biggest LPG tankers doubled to $78.25 a ton this year, according to the London-based Baltic Exchange, which publishes assessments for more than 50 routes. LPG includes propane, butane and ethane.

The cost of propane in northwest Europe, an industry benchmark, averaged $876 a ton this year, on track for the highest annual average in at least three decades, according to data compiled by Bloomberg.

Demand for LPG is strengthening now because consumers are expanding stockpiles before the Northern Hemisphere’s winter begins, said Steve Engelen, the manager of research and projects at Joachim Grieg & Co., an Oslo-based shipbroker.

Returns on capesizes, the biggest ships hauling iron ore and coal, are 50 percent below the five-year average. Global rates on the largest crude carriers are a negative $10,911 a day, compared with a five-year average of $28,429, Baltic Exchange data show. Clients still pay some fuel charges, cutting costs for owners moving ships into regions with better returns.

Orders at Yards

The LPG tanker fleet expanded 0.3 percent this year, compared with 6.3 percent for the biggest oil tankers and 14 percent for capesizes, according to London-based Clarkson Plc, the world’s largest shipbroker. Orders at yards in South Korea, China, Japan and Brazil for new LPG vessels are equal to 10 percent of existing capacity, the smallest ratio of any type of commodity carrier, according to data from Redhill, England-based IHS Fairplay.

While LPG tanker rates rose fivefold since March 2009, they are still only “a little above break even,” said Andreas Sohmen-Pao, the Singapore-based chief executive officer of BW Gas. The company hasn’t ordered new ships for five years and sold its oldest vessels, he said. The average LPG tanker is now idle about 10 percent of the time, compared with 25 percent in the past several years, Sohmen-Pao said.

Economic Growth

The projected jump in rates may be curbed should economic growth slow. The U.S., the world’s biggest LPG consumer, will expand 1.4 percent next year, compared with 1.7 percent in 2011, Goldman Sachs Group Inc. said in a report Oct. 3. The bank had previously expected growth of 2 percent in 2012. China, the second-biggest user, will slow to 8.7 percent in 2012, from 9.3 percent this year, according to the median of 10 economists’ estimates compiled by Bloomberg.

World energy consumption fell 1.5 percent in 2009, the biggest decline in at least four decades, as the global economy endured its worst recession since World War II, data from London-based BP Plc show. Natural-gas production fell 2.8 percent, the most since at least 1970, and oil refining retreated 2.6 percent, the largest contraction since 1981.

The process of extracting natural gas destined for liquefaction yields about 5 percent propane and a similar amount of butane or ethane, according to the Paris-based World LP Gas Association. Liquefied natural gas is produced by cooling gas to about minus 260 degrees Fahrenheit. A barrel of crude typically yields about 3 percent LPGs when it is refined, accounting for about 40 percent of global LPG supply.

Gas Futures

Crude oil traded on the New York Mercantile Exchange fell 5.6 percent to $86.24 a barrel this year as of 12:46 p.m. yesterday in New York. Natural-gas futures traded on the bourse slid 17 percent to $3.657 per million British thermal units.

Exmar will report net income of $26.6 million this year, compared with $14.1 million in 2010, according to the mean of four analysts’ estimates compiled by Bloomberg. Earnings will expand to $42.9 million in 2012, the estimates show. Shares of the company fell 20 percent this year in Brussels trading, compared with a 32 percent slump in the Russell Global Large Cap Shipping Index of 26 companies.

BW Group Ltd.’s 6.625 percent bonds maturing in 2017 trade at about 92 cents on the dollar, according to data on Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Bonds issued by Overseas Shipholding Group, the largest U.S. operator of very large crude carriers, and maturing in 2018 trade at 77 cents on the dollar, the data show.

“It’s the classic combination of basically zero fleet growth with increased demand,” said Wouter Vanderhaeghen, an analyst at KBC Securities NV in Brussels, who has a “buy” rating on Exmar. “This has been one of the poorest shipping segments out there, and they’re finally making decent returns. Everything is there for the stock value to increase.”