The consultancy highlighted the continued growth of the LNG carrier fleet, to 56m cu m as of June 2014, versus lapsing demand. In 2013, imports to Europe fell 23% due to increasing reliance on pipelines for gas, and demand in Canada and the US were met by ramping-up of domestic production, with imports falling by 42% and 45% respectively.
Meanwhile growth in Japanese LNG imports following the Fukushima disaster slowed to only 1% in 2013, and demand will only decrease if the country, as is expected, restarts its nuclear power plants.
“A deadly combination of expanding vessel fleet, limited cargo availability and falling trade caused short-term freight rates for conventional LNG carriers to decline through 2013 and the first half of 2014,” commented Drewry’s lead gas shipping analyst Shantanu Bhushan. “Although there are plans to add 64bn cu m per annum of liquefaction capacity during 2014-15, major concerns for shipowners are the timely completion of these projects, the possible restart of Japanese nuclear power plants and the fast rising vessel fleet.
“As a result, the outlook for unchartered vessels over the next 18 months is not favourable and we expect spot and short-term freight rates to remain under pressure.”
However, Drewry notes that in “the latter part of the decade”, demand is expected to increase as new sources of LNG, such as projects in Australia and North America, come onstream.
The findings reflect those announced by consultants Tri-Zen in May, when principal consultant Tony Regan told a Singapore conference that “In 2014 we might be a bit long on tonnage, but we are going to need a lot more vessels ordered if we are to meet this demand target for 2020”.
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