Rates to remain low

Thursday, 03 September 2020
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Headline timecharter rates continued to firm last week, broking sources said, although they were way down compared to that seen a few months ago.

The prompt spot charter rates rises seen late last week widened the inter-basin des price differential required to make fob volumes shipped west via Panama economical, analysts said.

For example, according to broking sources, West of Suez rates for TFDE LNGCs firmed to $56,000 per day last Friday, a rise of $7,000 per day from the previous week. Pacific TFDE rates rose to $50,000 from $40,000 per day (see latest rates table on page 10).

Spot activity picked up, with a number of vessels fixed, following weeks of low charter rates, going down to around $30,000 per day.

Kristen Holmquist, Poten and Partners Short Term Forecasting head, thought that US LNG export volumes would increase in the next couple of months.

Speaking at a recent webinar, she said that the weather and economic activity will play a major part in determining the direction LNG would take going forward.

She said that September cancellations were running at a lot lower level than those seen for the past two to three months, giving rise to optimism.

However, she thought that the current storage levels would remain quite high going into 2021 with European storage not returning to near normal until 2022.

Indian sub-continent demand

India was seeing a strong rebound in demand and is forecast to import around 28 mill tonnes of LNG by 2022, while both Bangladesh and Pakistan were also experiencing huge growth.

In the US, she expected a ‘long’ market next year, due to excess supply, saying that this area would take a long time to return to normal.

Despite the slight firming, LNGC rates were forecast to stay soft not varying much from an average of just above $40,000 per day through November 2022 for a standard 160,000 cu m vessel.

Floating storage levels will remain high heading into this Autumn, meaning that the cargoes already afloat would be vying with fresh supplies, leading to lower spot prices out of the US.

This Autumn, another lockdown scenario worldwide would be catastrophic for the LNG sector and for the worlds industrial sector as a whole, she warned.

However, Holmquist thought that the 2021 downside risks mainly lay in the world’s economic recovery not being as robust as forecast.

A recent forecast by Bank of America (BofA) Global Research said that although global inventories were sitting at the highest level seen for this time of the season, as we head towards the seasonal inventory peak in October, injections had slowed slightly in recent weeks and there was lessening risk of congestion and resulting price collapse in October.

Moreover, once the seasonal peak in inventories has passed, LNG demand should see the largest seasonal ramp up ever from 27 mill tonnes in August to 37 mill tonnes in December.

This sequential tightening in the global LNG balance in winter should push December 2020 JKM prices above $6 per MMBtu, BofA said.

The report also said that LNG cargoes could be start to flow a little sooner than normal, as LNG charter rates were still very low, compared to previous years, making floating storage economical for the next couple of months and as a result, having the effect of firming LNGC rates into the winter. 

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