We will be taking questions today. You'll have to type them in, and then I'll read them out to the group. With that, I'm going to mute my microphone and let Kristian Sørensen take it away.
Thanks, Michael, and welcome everyone to this presentation of BW LPG. My name is Kristian Sørensen. I'm the CEO of the company, and we have a small agenda today where we hopefully can give you a good overview of our company and the markets that we operate in. We will start off with the company overview, the market, and also the outlook for the LPG business and the shipping business. BW LPG, we are the world's largest owner and operator of very large gas carriers. We have 52 out of a global fleet of 403 ships under our commercial control. Although 90% of our balance sheet is in shipping, we also have a trading arm which is trading about 5 million tons of physical LPG annually, kind of placing them in the second tier among LPG trading houses in the world.
In addition to our shipping and trading activities, we're also developing our presence in the LPG infrastructure market, starting off with a small investment in the growing Indian LPG market, which is an important market for us, also on the shipping side. We have a high focus on returning value to our shareholders and have generated 23% annual return to our investors since the IPO on Oslo Stock Exchange back in 2013. Our main way of returning value is via dividend payouts, but we also have a share buyback program that we activate from time to time. In 2023 and 2024, we paid out more than 100% of our NPAT from our shipping activities to our shareholders. As you can see, our potential dividend yield is rising sharply when the freight rate starts to climb.
Right now, after the seasonal winter downturn, we're on our way back up, and right now we are in the spot market where rates are in the $40,000 per day and on the rise. We'll take a look at the historical rates later on. We are dually listed on the Oslo Stock Exchange and the New York Stock Exchange since last year, and we already have about 50% of our daily traded volume in the US. Our market cap is just below $2 billion on the New York Stock Exchange, and it's been going up over the last couple of weeks as the market has picked up. We'd also like to say a few words about our main sponsor because we are enjoying rock-solid support from our main shareholder, BW Group, which currently holds about 30.6% of the shares in the company. Next slide.
A few words about the BW Group, which is one of the largest maritime shipping and shipping groups in the world. It's controlled by Mr. Andreas Sohmen-Pao, who's Singapore-based. On the New York Stock Exchange, he's the largest shareholder in five companies: two in the tanker space, being DHT and Hafnia; two in the gas space, being Navigator Gas and ourselves, BW LPG; and then Cadeler on the wind ship installation segment on the right-hand side. If you look at our company and our peer group, it's currently only two companies in the peer group on the New York Stock Exchange. Dorian LPG is a competitor we highly regard, but you can see that in terms of size, we are substantially larger than Dorian LPG. We operate in the same market.
We have a slightly different fleet composition, as you can see on the right-hand side, with Dorian having fewer of the latest dual-fuel technology vessels. Overall, we're operating in the same market and in the same space in terms of clients and the way we are being exposed to market fundamentals. However, there are a few other differentials between our companies. If you can flip to the next slide, please. We are also, as a shipping company, spreading out our wings a little bit in the LPG value chain. Even though shipping is our core business, we also have, as mentioned, activities in the cargo trading side as well as in LPG infrastructure.
The reason for this is that, as a shipping company, when you operate in a volatile trade market, you're pretty much exposed as a pure price taker in a market that fluctuates quite tremendously from year to year and quarter to quarter. To take out some of the fluctuations in the revenue stream and to have a more stable income source and also spread out the revenue stream, we had back in 2018 a decision made to start moving our own cargoes under the name of BW Product Services.
The rationale behind this is that when you look at how value creation takes place in the LPG value chain, when moving a cargo from Houston to the Far East with LPG, there is profit made on the shipping of the cargo as well as on the value of the cargo, as you can see illustrated in this slide at the bottom in the price differential between Houston and the Far East pricing of the landed product. In good markets for shipping, shipping takes up most of the value creation and can have a super profit made on the price differentials in between Houston and the Far East.
You can see here that the trade margin on the cargoes is relatively low, but when the freight markets turn slightly softer, as illustrated here, you will see that the value creation and the profit making in the value chain does not disappear but moves over to the cargo side and less to the shipping side. Through our business model, we are able to capture more of this profit. Even though shipping is sometimes weaker, we participate in value creation on the trading and cargo side, which, as mentioned, makes us more robust in terms of the fluctuations that we are exposed to in the freight market than if we were just a pure shipping company. This is a big differential that differentiates our company to Dorian LPG.
Just to briefly explain how the trading activities work, our trading team does not take any flat price exposure or bets on crude oil prices or Henry Hub going up and down. They simply trade on price differentials of LPG between geographical regions where they combine cargo positions, typically long-term contracts out of the US, with delivery commitments and short cargo positions in the Far East. In addition, they use derivatives in an extensive way to hedge the positions that they take on the physical cargo side to lock in the price differential and the profit. They also have a shipping portfolio which they use to secure the logistics needs to move the cargoes from the U.S. or the Middle East to the destinations in Asia. It is a very balanced portfolio.
They are never massively long or massively short, and they do have quite a few tools in their toolbox to manage the risk in the market, and that's also reflected in the very tidy profits they have made over the last years. Just a few words about the key milestones in 2024, which have linked us closer to the U.S. markets. I mentioned the dual listing on the New York Stock Exchange, where we're trading under the ticker BW LPG. This has had a tremendous boost in terms of liquidity in our traded shares, as well as the increase in investor base by combining both the U.S. investor base with the Scandinavian and European one.
Back in May, we also increased our engagement with Enterprise Products Partners, which is the biggest LPG export terminal on the U.S. Gulf Coast, where the trading team took up a multi-year contract with Enterprise and increasing the cargo volume that we have and will lift out of the U.S. Gulf in the years to come. Just to mention it, we have a ship calling a US port basically every second or third day during every month of the year. We have a very strong link to the U.S. shale gas story, as exemplified both by this contract that our trading team has recently concluded and also by expanding our fleet through a major acquisition we did last year by buying 12 VLGCs from our peer here in Oslo, Avance Gas, which increased our own fleet by 44% while increasing the share count by 15%.
It was a very accretive transaction for our shareholders when we concluded that deal back in August. Let's take a look at the LPG market and the outlook for the market that we operate in. I'll start off with explaining what LPG actually is. LPG is propane and butane, and most of us recognize propane from the cylinders that we use in our barbecue. It's a byproduct of natural gas and the crude oil production and the refining. It's a clean product. It burns well. It has a very high calorific value. It's very competitively priced because it's a byproduct, like I mentioned. All the producers, they want to, at one point, get rid of the excess LPG that they produce.
It is a very versatile commodity, which is extensively used in the residential sector in typically countries like Latin America, the Indian subcontinent, and Southeast Asia, where they do not have electricity or the natural gas pipeline grid built out properly. The cylinders are very easy to distribute to these parts of the world. It works as a main fuel for hundreds of millions of people in this part of the world for both heating and cooking. There is another big demand center in Northeast Asia, where the propane especially is being used as feedstock in the petrochemical industry. This is typically in China, Japan, and Korea, where it is more used as an industrial commodity and feedstock for the pet chem industry. You can see that the global production of LPG has had a fantastic story over the last year, which is set to continue.
This is very much on the back of the shale gas and shale oil story in the US. You can say that about 5-10% of the crude oil and natural gas wells constitute propane or butane, primarily propane. Every time there is a natural gas field being developed or a crude oil well being developed, there is also LPG coming out from the ground on the back of that. These dynamics with LPG being a byproduct, where the U.S. has a very steady consumption of about 50 million metric tons a year, while the production is increasing year by year, allows for more export and more shipping of the commodity to the international markets.
Since it's a byproduct, it has to be priced competitively to clear in the international market and shipped to primarily Asia, where 80% of the cargoes from the U.S. end up on our vessels, and to a smaller extent also to Europe, especially during the wintertime. On this slide here, we're trying to illustrate the main trades. It's very similar to what you see in the oil and tanker space, with exports from the Middle East to Asia and also from the U.S. Gulf to Asia and Europe. Like I said, with 80% of the cargoes from the U.S. Gulf ending up in the markets in Southeast and Northeast Asia, it's a great story for shipping because this dislocation with long distances is underpinning the demand for shipping.
That is why we have and are also still enjoying healthy demand for our vessels, which is reflected in our earnings and the rates in the market. As mentioned, the VLGC market is quite volatile. You can see on the left-hand side here the U.S. Far East spot rates, the day-to-day rates, which can go from $80,000, $100,000 per day down to $10,000 per day in a quite short period of time, typically during the wintertimes in the US, where colder weather and cold fronts in the Midwest and Texas increase the domestic consumption of LPG in the US, also shuts down some of the infrastructure in Texas, which is used to process the LPG and make it available for exports.
Suddenly, there is less demand for shipping, which is reflected in these sharp drops in the beginning of 2024, as well as you could see the same story, but in a different range taking place into 2025. However, as you move into the typically April, May, June time of the year, the rates, they start to pick up again because there are more cargoes made available for exports from the States. That is what you see illustrated here on the left-hand side, and also what we do see at the moment happening in the spot market as more cargoes are marketed for export out of the U.S. Gulf Coast. We have a cash break-even this year of $25,600 per day.
If you look at that number compared to the spot market and the time charter market and the income last year, you can see that there is a considerable free cash flow generation over and above our cash break-even. Next year, this cash break-even will fall back into where we usually are, around $22,000 a day because of less periodical maintenance of our ships. We have 18 of our ships going out for dry docking, which is in a five-year cycle. Next year, it is falling back towards $22,500 a day, which is where we historically have been on our cash break-even. We do have ways to protect our downside volatile freight market, except for our business model, which I talked about with Product Services and the trading arm, which is giving us additional revenue stream and potential for employment internally of our ships.
We typically aim for about 35-40% of our fleet capacity to be covered by time charters and also hedged through the paper market. After the acquisition of these 12 vessels end of last year, the percentage of coverage went down to 31% on the time charter and the small paper position. We are working towards the 40% benchmark, which we hopefully will end up at during this year. This is the way that we protect our downside in this very volatile market. We think it's prudent to also keep solid exposure to the spot market because when the market moves and the spot rate starts to pick up, there is a considerable upside which our shareholders like to have exposure to. If you look at the key drivers for VLGC shipping demand, there are three main drivers you can focus on.
Number one is the North American LPG exports, like I mentioned. It's mainly from the U.S. Gulf Coast. There is also a building-up expansion and export capacity on the West Coast of Canada. You can see that the anticipated exports of LPG on VLGCs in the coming years is steadily growing. These are all in million metric tons. At the moment, you can say that all waterborne LPG worldwide, the U.S. at the moment is representing between 50% and 60%, just to give an illustration of the size of the waterborne LPG market. The U.S. is the main driver and also the main producer of LPG in the years to come and will continue to be so.
There is also substantial production in the Middle East, which is growing pretty much on the back of new natural gas fields, which are coming on stream in Qatar as well as Abu Dhabi. Most of these exports end up in the Indian subcontinent or the countries further east. There is no Middle East to Europe trade, for instance. It is a very simple trade, as also shown in the map previously, which is less complex than what you see in some of the smaller chemical or tanker markets. It is quite easy to follow these two drivers. In the U.S., for instance, there are weekly reports on the stocks of propane in the U.S., how much has been exported, and so on. It is pretty transparent and the same for the Middle East.
Finally, there is a third driver, which is important to keep an eye on, but this is much more unpredictable, and that is the Panama Canal traffic. Because when you ship a cargo from the U.S. to the Far East, the shortest route is through the Panama Canal. The Panama Canal has a very limited capacity of only 10 transits in total, both directions per day in the new locks, which is where most of the VLGCs are sailing through. As you can see here, illustrated by the light green bars, the VLGCs take up between two and three of these 10 transit slots per day, which is a lot of the capacity compared to how small the VLGC freight market actually is. The canal was primarily built for container ships and LNG vessels, and VLGCs are not prioritized from the Panama Canal authorities.
What happens when the Panama Canal is congested is that more VLGCs have to sail around South Africa to and from Asia and the US. That is a much, much longer distance, 40-50% longer sailing distance, which is taking out a lot of the capacity of the fleet globally, and the freight rates react by going up quite sharply. The Panama Canal is a wild card in our market. It is hard to predict, but when there is congestion there, like we saw back in 2023, there was also a drought situation back then, and more VLGCs have to sail around South Africa to and from the U.S. and Asia. This is immediately triggering a sharp increase in the freight rates and consequently our earnings.
One thing that we view very positively is the substantial LPG export expansion, which is taking place and planned in the U.S. As mentioned, the main driver in our market is the U.S. exports of LPG. If you look at the expansion plans, which we have illustrated here, there is a big expansion coming middle of this year from Energy Transfer in the U.S. Gulf and also from the Targa terminal later in the year, which is slightly smaller but still part of the expansion that we see, which is taking place. Enterprise, being the biggest terminal operator on the U.S. Gulf Coast, is having two big expansions next year.
Targa and ONEOK , as you can see also in 2027, 2028, is adding substantial capacity to prepare for the exports, which is typically fueled by production of hydrocarbons in the Permian and also the other natural gas projects in the US. We believe that this is a very positive sign for shipping of LPG because terminals do not invest in expansion unless they have a clear, visible view on the increased production and what is made available for exports in the years to come. Also in the Middle East, you can see there are additional volumes coming on stream from Qatar in 2026 and 2027. The main driver here is definitely what's going on on the back of the shale gas and shale oil market in the U.S. and to a lesser extent also in Canada.
Looking at the demand side of the commodity, like I said, it's a byproduct. LPG is very much a supply-driven market as such, but there is 80% of all the volumes, like I mentioned, end up in the markets in Asia. In addition to Japan, Korea, where you see a lot of LPG ending up in industrial use and partly power generation, the Chinese imports have been increasing substantially over the last four or five years on the back of pet chem demand and using propane as a feedstock into PDH plants in China. Currently, more than 50% of all the Chinese imports originate from the US. There is a very high dependence on U.S. export volumes for the Chinese imports. If you look at the Indian imports of LPG, they are very much fueled by the residential sector, heating and cooking.
As it stands now, the Indian LPG imports are more than 50% of the production of LPG in the Middle East. India is consuming so much more than it used to of the Middle Eastern exports that all the countries further east in Asia, Indonesia, Philippines, Vietnam, as well as China, are more and more dependent on exports from the U.S. to meet their growing demand for LPG. Right now, at least 36%, maybe even close to 40% of all the volumes which are imported into the Southeast Asian markets originate from the US. This is also underpinning our market because of the long volumes, sorry, long distances that you have to sail from the U.S. to this part of Asia. Looking at the VLGC fleet and the new buildings, this is, of course, a very important element of our market to keep an eye on.
We are, in the next 12 to 15 months, having very good visibility and a modest increase in the global fleet's capacity. Like I said, it's a relatively small fleet globally. It's only 403 ships. This is one of the smallest shipping segments out there. There is only 5% of the current fleet which is being delivered the next 12 to 15 months. There is an order book coming on stream in 2027 and into 2028, but this should also be viewed in connection with the volumes which are coming on stream from the Middle East and the U.S. and the terminal expansion that we just showed you, as well as another market which is coming up, which is the liquid ammonia market and blue ammonia market from the US, where a big chunk of these ships can actually be used both for shipping ammonia and LPG.
It remains to be seen how many of these ships will actually trade in ammonia when they are delivered because the blue ammonia projects in the US, they seem to be delaying somewhat. It could be that this is more a game for, let's say, the market later in this decade and into the 2030s. A big chunk of this fleet is actually built to also carry ammonia from the U.S. to the markets in Asia.
Kristian, this is the moderator. I hate to cut you off, but I need to keep us on schedule. Maybe just by way of wrapping up, could you summarize the value proposition for BW LPG? Why should an investor invest in you and why now?
I think that the main reason why I should invest in BW LPG is that we are a company which is focusing on returning value to our shareholders. We have a strong track record on dividend payouts, which is our main way of returning value to our shareholders. We are enjoying healthy markets. We have a strong balance sheet with low leverage, and we keep our cash break even at the modest level and make sure that the free cash flow generation is kept at an optimal level so that we can pay out as much dividends as possible. I think our track record in terms of dividend yield and how much of the profit that we make, which is returned to our shareholder, is the main reason why I should invest in our company.
Outstanding. Kristian and Gaia, thank you very much. A fascinating story.
Thank you for joining us. Members of the audience, thank you for joining this seminar. I'm going to end the seminar now to keep everything on schedule. Thank you again.