LNGC rates to soar

Thursday, 13 October 2022
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Daily spot charter rates for modern LNGCs could average $365,000 per day in the fourth quarter of this year, according to Drewry Shipping Consultants.

In addition, 1Q23 rates could average $145,000 per day much higher than recorded in the same period of 2021 and 2022. A recent fixture was reportedly concluded at $400,000 per day.

The markets were described as “on fire” with several records looking set to be broken this winter.

Beyond 2023, market projections were still bullish with ME-GI and X-DF powered LNGCs’ demand surging to 2027, Drewry said, on the back of a tightness in newbuilding deliveries and regasification capacity worldwide.

As for steam powered vessels, as they come off their present charters, they will become FSU conversion candidates or consigned the the recycling yard, mainly down to the new EEXI and CII regulations, due to come into force next year.

Vessel supply is currently tight, due to European demand mainly driven by a large drop in Russian pipeline gas reaching Europe. There are virtually no newbuilding slots left until 2026 with discussions between owners, operators and shipyards now ongoing for 2027 deliveries.

Relets are dominating the charter market at present. However, charterers with long term contracts were not willing to sublet their vessels as rates rise. Floating storage is also rising, especially near Gibraltar and the Suez Canal.

LNG trades are forecast to reach 395 mill tonnes this year, up by 6% year-on-year, rising to 517 mill tonnes in 2027.

Supply improvement

Meanwhile, LNG supply improved by 11% in 3Q22 to an estimate of 97.5 mill tonnes but there is a challenging supply outlook for 4Q22 with exports forecast to hit 99.1 mill tonnes.

US exports are expected to grow on the back of new projects but both Algeria and Nigeria are struggling with technical and feedgas problems, while an improvement in Australian volumes will be seen, due to fewer outages.

More than 200 mill tonnes per annum of liquefaction capacity could be the subject of a final investment decision (FID) by 2024. Drewry said. However, the large Mozambique and Russian projects look likely to be delayed.

Global liquefaction capacity will rise at a CAGR of 7.4% from 2022 to 2027 to reach 674 mill tonnes per annum.

This winter, Europe is expected to continue its importing spree, however, competition for LNG cargoes with Asia will occur sooner or later, Drewry said, which should help sustain the high rates.

In Europe there is currently some 185 mill tonnes per year of regasification capacity available with another 38.1 mill tonnes under construction. In addition, a further 68.6 mill tonnes is at the planning stage and another 21.1 mill tonnes is speculated.

As for Asia, looming gas shortages are forecast with some countries returning to coal and fuel oil, due to the high gas prices.

Stockpiling in Japan and South Korea has emerged, while the higher prices are impacting on future LNG-to-power projects in Vietnam and Indonesia, among other countries. 

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