In a market where LNG spot prices have followed a downward trajectory since late December, LNGC period charter rates also retreated from their heights.
However, owners were still looking for firm numbers, due to a positive demand outlook, especially for the second half of this year, Greek-based Intermodal Shipbrokers said in a note.
This year, the dynamics established in 2022 will remain with Europe maintaining elevated LNG imports, while the reopening of China may boost demand. To start with, the much-anticipated recovery of the Chinese economy will pivot global gas markets, as the country’s LNG demand is set to rise, especially from 2Q23 onwards.
Demand growth this year is forecast at 382 bill cu m, led by the industrial sector. Chinese spot demand, however, will remain tight due to the start of new contract deliveries. In addition, European countries will continue to try to replace lost Russian pipeline volumes.
Imports will remain high and will be sought from further afield, thus increasing tonne/miles for seaborne deliveries. Demand destruction will persist in 2023, but the trajectory is uncertain. Seaborne imports are expected to peak towards 3Q23 ahead of the next winter when EU countries will need to refill their storage capacity.
In Southeast Asia, Thailand will lead LNG demand growth amid declining domestic production and pipeline imports, while Singapore will see increased demand for the power sector, as well as higher usage of LNG bunker fuel this year.
Supply/demand tight
Limited supply growth will keep the supply/demand balance tight through 2023. Supply growth is projected to be a marginal 3.4%, which will be driven by from plant outages recovery rather than new capacity.
In the US, gas production will remain strong, however, it will be constrained by limited LNG export capacity additions during the year.
An additional 56 mill tonnes of project capacity approvals are expected this year mainly involving Qatar and the US. These two major producing countries are set to drive a huge global expansion programme.
Overall, supply growth will be limited until 2025, but between 2026/28, Intermodal forecast an average supply growth of 5.7%, based on post-final investment decisions (FIDs). The key driver behind the projected growth is pressure from regulators and investors for cleaner LNG across the value chain, which will buoy long-term demand.
In terms of vessel supply, according to the broker’s preliminary data, in 2023, 144 new vessels will enter the market, which is anticipated to match the new liquefaction capacity that will be added this year of more than 15 mill tonnes.
Tonne/mile growth forecast is more than 3.5%, underpinned by the resumption of exports from the Freeport LNG terminal. Moreover, the scheduled drydocking of several older vessels this year will limit vessel availability and thus, underpin freight rates.
The IMO’s CII regulation, which came into force on 23rd January and will be reinforced by 2026, will be supportive, as it will prompt vessels to slow steam and thus, increase tonne/days.
Lastly, S&P activity has gained momentum, as in 2022 a total of 43 LNGCs changed hands, according to Intermodal’s database, while in 2021 only eight vessels were reported sold.
As the short-term and spot market continues to develop, more independent owners will be prompted to enter the trade this year, and more secondhand sales should be reported.
