How ‘Maximum Pressure 2.0’ could play out in VLGC market
- Analysis shows about 10% of global VLGC fleet, excluding sanctioned vessels, are involved in Iranian LPG trades
- Crackdown would boost tonne-miles for mainstream VLGCs, but scope and enforcement will matter
- Iranian LPG supply chains more efficient than crude, making LPG ‘an attractive target’ for enforcement efforts
VLGCs were unscathed by US sanctions until last year but the pace of designations may pick up under the new US administration. If new sanctions are imposed — and enforced — mainstream owners may benefit from even a relatively modest cut to Iran’s LPG exports
VERY large gas carriers operating in mainstream trades could reap substantial benefits from a crackdown on the Iran-trading fleet under US President Donald Trump’s “Maximum Pressure 2.0” campaign, but the details and scope will matter.
A Lloyd’s List analysis of vessel-tracking, cargo and satellite data found 10% of the global non-sanctioned VLGC fleet is involved in Iranian liquefied petroleum gas trades, activities that could land them on the blocked property list of the US Office of Foreign Assets Control and hamper their ability to continue trading.
As of February 13, 2025, there were 46 non-sanctioned VLGCs linked with Iranian LPG trades, plus 10 that are under US sanctions, the analysis found. The former account for about 3.6m cu m in carrying capacity.
A crackdown on Iran’s LPG exports and the VLGCs facilitating them could boost tonne-miles for compliant VLGCs if sanctions are imposed, enforced and adhered to.
Here’s how it could play out.
Fewer ships, longer distances
On February 3, Trump signed an order to restore the “maximum pressure” campaign on Iran from his first term, vowing to drive Tehran’s oil exports “down to zero” including exports of Iranian crude to China.
The order requires the Department of Treasury to issue updated guidance to all relevant business sectors including shipping, insurance and port operators about the risks to “any person that knowingly violates US sanctions with respect to Iran or an Iranian terror proxy”.
According to energy consultants Facts Global Energy, Iran exported approximately 11.5m tonnes of LPG in 2024, a slight increase from the 11.4m it exported in 2023 (the data include a small percentage of land-based exports). Those figures place Iran as one of world’s top three LPG exporters, along with the United Arab Emirates and the US, which alone accounted for more than 40% of seaborne exports in 2024.
Over 85% of Iranian LPG is exported to China, according to data from commodities analytics provider Vortexa. If the US blocks a sizeable chunk of the Iran-trading VLGC fleet, and Chinese port operators and importers shun them — as Shandong Port Group announced earlier this year — it would deal a blow to Iran’s LPG exports.
A shipping executive whom requested to remain anonymous estimated Iran’s LPG exports at about 11m-12m tonnes annually. If sanctions take out even a quarter of those exports, mainstream VLGCs could see a substantial upside, assuming global LPG demand remains largely unchanged.
“The rule of thumb is that it takes about four to five VLGCs to ship 1m tonnes of LPG in a year,” the executive told Lloyd’s List.
That meant that even if Iran’s trade was reduced by just 25%, replacing those volumes with LPG from non-sanctioned producers would create demand for an additional 12-15 VLGCs as LPG was sourced from elsewhere, he added.
According to FGE Middle East managing director Iman Nasseri, a US crackdown on Iranian LPG could cut exports by 20%-30%. However, if China phases out Iranian LPG — perhaps as part of a future US-China trade deal — it could have a “material impact and cut Iranian LPG exports down by 50%-75%”, Nasseri told Lloyd’s List.
The removal of the blacklisted tonnage could increase demand for mainstream ships in two ways. First, more cargoes would need to be transported on non-sanctioned vessels, increasing demand for mainstream VLGCs. Second, cargoes would need to be sourced from farther destinations, which would further boost tonne-miles.
Iranian LPG will likely be replaced by cargoes from other Middle East Gulf producers but also exporters in the US Gulf, where Energy Transfer’s Nederland Terminal is set to have its capacity expanded by 250,000 barrels per day to about 950,000 bpd in 2H25.
Middle East export capacity is somewhat restricted due to current Opec production levels, but the shipping executive said with the upcoming Nederland terminal expansion, producers in both the US and Middle East Gulf will likely find ways to accommodate the demand that would arise if Iran’s exports were hypothetically slashed by a quarter.
Sanctioned VLGCs continue trading
For the mainstream market to see substantial upside from sanctions, they need to disrupt Iran’s LPG supply chains and substantially reduce the activity of vessels facilitating the trade.
That has not been the case for the nine VLGCs sanctioned in 2024 (an additional Iran-linked VLGC, Owens (IMO: 9223540), was blocked in early January after its owner was sanctioned for Russia links).
Four VLGCs were blocked by Ofac in April 2024, and an additional five were blocked in mid-August 2024. Vortexa data showed a steep decline in cargoes lifted by sanctioned VLGCs from August to September, but volumes have mostly rebounded since.
However, a market source told Lloyd’s List in November that Chinese buyers were also growing warier of running afoul of US sanctions on Iran. Perhaps because of that very wariness, a VLGC with suspected Iran-origin LPG spent two weeks at anchorage off China in early December before ultimately making a U-turn and discharging in Sri Lanka and Bangladesh.
The US-sanctioned Raha Gas (IMO: 8818219), also appears to have run into some difficulties calling in China, having loaded a cargo while manipulating its Automatic Identification System in the Middle East Gulf late October.
The vessel called in Gaolan, China in mid-December and offloaded most of its cargo, according to its AIS draught, but has been sailing between ports along the Chinese coast without discharging the remaining LPG since. On February 18, it arrived in the Zhoushan Huafeng shipyard in Zhoushan, China.
Conversely, another US-sanctioned VLGC, Tung (IMO: 9350422), discharged a cargo in Zhapu, China on February 12, according to Vortexa.
More efficient supply chains
Lloyd’s List analysed vessel-tracking data from Lloyd’s List Intelligence, satellite imagery from Planet Labs and the European Union’s Space Programme, cargo data from Vortexa, and leaked documents from Iranian dissident website WikiIran to assemble the list of 56 Iran-trading VLGCs.
Perhaps because the origin of an LPG cargo is easier to obfuscate compared to crude oil and the lighter regulatory scrutiny, sanctions circumvention tactics in the VLGC sector are somewhat less sophisticated than displayed by oil tankers carrying Iranian crude.
A cargo of Iranian crude exported on board a very large crude carrier typically undergoes multiple ship-to-ship transfers before reaching its disport. In contrast, Iranian LPG supply chains tend to be more efficient, with VLGCs either going directly from Iran to their destination — typically China — or through one STS transfer in the Middle East Gulf (excluding lightering operations in places such as Bangladesh where ports cannot accommodate VLGCs).
Sanctions and regulatory scrutiny could inject inefficiency into Iran’s LPG supply chains, increasing costs and reducing exporters’ margins.
“While Iranian LPG shipments do rely on ship-to-ship transfers, their supply chains remain more direct than those of crude oil, making them an attractive target for enforcement efforts,” said Claire Jungman, chief of staff at US-based advocacy group United Against Nuclear Iran, which tracks Iran’s oil exports and the vessels facilitating the trade.
“Unlike crude, which often undergoes multiple, complex transfers to obscure its origin, Iranian LPG typically moves through one STS transfer in the Middle East Gulf before reaching its final destination, primarily China.”
