There will be a tight, seasonal shipping market this winter, Jefferson Clarke, Poten & Partners head of LNG Analytics forecast.
He said that the main market fundamentals going forward would be the weather, Panama Canal transit restraints, newbuilding price hikes and the approaching IMO regulations on energy efficiency and carbon index reporting.
Currently, LNG demand remains strong in China, Latin America and South Korea. However, Europe was well below 2019 levels and the storage draw down last winter has not been replaced, which could cause problems this winter.
He stressed that looking ahead, ambient temperatures would be the short term wild card, as a bad northern Hemisphere winter will lead to increased demand, resulting in extra shipments being needed.
At present, there is very little spot LNGCs available, which have helped rates remain above the $60,000 per day mark. Of course, the question is - how far will the current spike in LNG prices go?
More charterers are now looking for term business, resulting in the large orderbook, which contains speculative contracts ordered during the past two to three years, seeing uncommitted LNGCs decline in numbers.
Clarke said that more charterers were looking for six months to three years period business. He explained that charterers needed to book tonnage ahead, due to the longer tonne/miles created by increasing US exports to Asia, especially using the Cape and Suez routes.
Newbuilding prices were also increasing, based on rising demand and the lack of newbuilding slots, due to the massive hike in containership ordering recently.
He also explained that the recent decline in exports was mainly due to some major players having supply issues and not due to a drop in demand.
During the first half of this year, US exports to Asia increased by around 92 cargoes or 80%, compared with the previous year. However, due to the Panama Canal constraints, voyages via the Cape of Good Hope and the Suez Canal increased by 7% and 17%, respectively.
Clarke explained that even with the reservation and a slot auction system in place, the maximum number of LNGCs able to transit the Panama Canal is only four per day.
He said that at 14.5 knots a US Gulf/Japan round trip would take around 58 days, compared with 95 days via South Africa. This equates to 2.7 vessels for every million tonnes of LNG via Panama and 3.4 vessels via the Cape.