2020 began with strong market fundamentals. Our internal research also foresaw continued positive freight markets for the year. In order to capture expected upside in the spot market, we positioned ourselves with a low contract coverage of 7% at the end of 2019.
Towards the end of Q1, the fundamentals changed after oil prices collapsed because of a price war between the Organisation of Petroleum-Exporting Countries (OPEC) and Russia, and the growing spread and concern over COVID-19. In April, OPEC and Russia were forced to end the price war, leading to record-high cuts in oil production.
With the sudden change in market fundamentals, we rapidly increased our time charter coverage to 25% for 2020 and 14% for 2021 at healthy levels, before the market plummeted. At the end of Q2, VLGC freight rates collapsed to OPEX levels. During this challenging period, customers preferred to deliver LPG cargoes rather than charter vessels. This change in customer behavior benefitted BW LPG, as we could leverage our Product Services division and offer customers a low-risk and fully-integrated product delivery service.
The Product Services division complements our core shipping business, and in 2020 has helped to maintain an industry-leading commercial utilisation rate of 98% for our fleet.
At the beginning of Q3, LPG demand from propane dehydrogenation (PDH) and steam cracking started to recover due to improving margins, and the commissioning of new Chinese PDH plants also added incremental import requirements. In addition, US LPG production remained resilient despite low upstream activities. Internal research indicated a V-shaped recovery in the VLGC freight market, and we took on contract coverage at a slower pace.
In 2020, we achieved a fleet-wide VLGC TCE rate of US$37,900/day on available days. Our balanced portfolio, strong commercial performance and best in class operational management have shielded us from market downturns and positioned us well when markets recovered.
We remain committed to a sustainable asset management strategy. We focus on optimising our existing fleet, investing millions to upgrade younger vessels with LPG dual-fuel propulsion technology. This pioneering technology will help our industry decarbonise without the need for dedicated newbuilding orders.
To capture growth opportunities in India, we increased our presence with more time charter fixtures and doubled our fleet in our Indian Joint Venture.
Due to the weak oil price environment and OPEC+ production cuts, global LPG exports by all major exporters declined except for North America.
Total North American exports increased by 14% to 46 million metric tonnes in 2020, driven by strong LPG production from the US despite lower upstream oil and gas productions.
BW LPG lifted 7.5 million metric tonnes from the US alone, which was 16.2% of the total North American LPG exports.
Chinese LPG import demand fell in 2020 due to lower retail demand and increased domestic production. However, several new Propane Dehydrogenation (PDH) plants came onstream in 2020, adding incremental demand.
India continues to be the most consistent and meaningful driver of LPG demand and is now the second largest LPG importer after China.
Following the collapse of oil prices in March, LPG price differentials also fell. BW LPG’s Product Services division helped improve utilisation during periods of weaknesses in Q2. Price differentials started to improve in Q3 with improving demand for LPG imports.
Shipping inefficiencies such as weather disruptions in the US, bunkering delays, heavy dry dock schedules, abnormal waiting times in the Panama Canal and discharge port delays supported the widening LPG price differentials in Q4.
Due to COVID-19 restrictions and seasonally strong LNG and container vessels transits via the Panama Canal, Southbound traffic reported 14-day delays in late December. Heavy congestion in Panama Canal pushed VLGC rates to over US$100,000/day.
Other shipping inefficiences such as a heavy drydocking schedules, delays at discharging ports and bunkering ports, weather disruptions in the US loading ports also supported the VLGC freight market in 2020.