News & Media

15 March, 2019

LNG Market News - Japan

(Source: Kaiji Press News 14/Mar/2019)

LNG carrier spot rates soften amid warmer winter

Rates standing at about $50,000/day for cutting-edge units, but hopes high for recovery in latter half of 2019

Spot freight rate market for LNG carriers is getting softer due in part to seasonal factors. According to U.K. maritime transport broker Clarkson plc, the spot rate recently stood at about $52,000/day for 160,000-cbm tri-fuel diesel electric (TFDE) vessels and at around $32,000/day for 145,000-cbm steam turbine vessels. In usual years, the market tends to stagnate in spring due to diminishing LNG demand, and in 2019, “LNG demand is struggling to expand due to another element, that is, the effects of an unseasonably warmer winter,” as a shipping-related official put it.

In 2019, the market got off to a firm start, with the spot rate for TFDE ships standing at $85,000/day in excess of the breakeven point. But, it later followed a downtrend, with the rate for cutting-edge vessels slipping below the breakeven point said to be somewhere around $70,000/day for such vessels.

Since 2017, demand for spot charters of LNG carriers has been led by China. Yet, though LNG demand itself has been growing continuously in 2019, “there has been no situation in which China is actively engaged in spot procurement of LNG,” the above official points out. Still, there is usually the trend of the LNG carrier market rising in autumn/winter and weakening in spring, and some related officials believe that “the most recent market moves were broadly in line with the typical trend seen in usual years, though theoretically, the spot freight rates should have stood at a bit higher levels than now.”
The spot market for LNG carriers in 2018 hovered at high levels even during the summer season mainly because China expedited LNG procurement ahead of the winter demand season. The rates soared in November, surging close to $200,000/day for TFDE vessels and around $100,000/day for steam turbine units. The rates softened in December but still stood high at around $120,000/day and over $70,000/day, respectively. The solid performance stemmed in part from stranded cargo-laden LNG carriers at ports, which practically led to a decline in supply volume of ship bottoms.

As to the outlook for the market, a shipping-related official anticipates, “Though the market may not rise in 2019 as rapidly as in 2018, it will probably go up from around summer when ship arrangements usually becomes active prior to the autumn demand season.” Echoing the forecast, another official points out, “The bright outlook remains unchanged since it is said that ship bottoms will run short in the latter half of 2019.” As such, hopes are high that the market will pick up in/after summer.

In 2019, the Ichthys project in Australia is slated to get into full swing, and such new projects as Cameron and Freeport in North America are scheduled to become operational. In such a situation, project ships are expected to withdraw from the spot market, and fresh demand for spot LNG transport from new projects are likely to arise. LNG carriers newbuilding completions exceeded 50 units in 2018, and is slated to stay high at 40 units in 2019 as well. Yet, “Many of newbuildings due for completion will be assigned to new LNG projects in areas such as North America,” and so, an increase in ship bottoms on the spot market may probably be averted if the above projects become operational smoothly.

Whilst every effort has been made to ensure the accuracy of the information contained herein, Inchcape Shipping Services (ISS) accepts no liability nor makes any representations or warranties of any kind, express or implied, as to its completeness, accuracy, reliability or suitability.