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Live From Posidonia 2014
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Current LNG carrier orderbook too small to meet robust future demand

Although the LNG shipping market is expected to take a bit of a dip over the next two years the current newbuilding orderbook is seen as insufficient to meet demand later in the decade according to leading shipowners.

“Growth of LNG trade has been around 8% over the last few years, but it is expected to moderate over the next two years,” Frans van de Bospoort, managing director & global head of tanker group for DVB Bank, said at the 4th Posidonia, analyst & investor day, Capital Link Shipping Forum.

The current slowing in demand has been as result of delays in liquefaction projects while ships are completed on time. Simon Crowe cfo of GasLog said that there was a very robust demand outlook, but there would also be some “bumps in the road” as well. “Ships are delivered on time, shipyards are like Swiss clocks and they tick along, and produce ships on time, but plants take more time and there some delays,” he said.

Given this scenario although are 100 vessels on order, roughly equivalent to 25% of the current fleet, Tony Lauritzen, ceo of Dynagas LNG Partners, does not believe this enough in medium term.

“When we look at the world fleet which is about 400 vessels, but production is around 234m tonnes per year, that gives 1.6 vessels per 1m tonnes of production. When take the 100 vessels on order and match that against the forecast production coming on stream going forward which is around 110m tonnes by 2020 we find out the 100 vessels on order is not enough, we need at least 180 based on current production,” he explained.

In addition Lauritzen noted that roughly 70% to 80% of the current orderbook was committed to projects and there was also the factor of scrapping. “I would say 130 to 140 vessels in the world fleet are less than 140,000 cu m, which basically means they are quite small for the average cargo size of 145,000 cu m.

Taking that into account I think the market looks very good,” he added. Crowe also said they expected to see some scrapping.

Richard Gilmore, director gas fleet at Maran Gas Maritime noted that demand from Japan after it shut down its nuclear power plants following the Fukushima disaster in 2011 had driven the market over the last two years, but even with this becoming less of a factor demand would shift to other markets seeking clean energy.

“If we go back 10 years or more gas had a hard time competing in the market place, there wasn’t as much emphasis on emissions and the environment but now that has changed. So if Japan puts back on some if its nuclear power production will just shift to other countries and there are many that are increasing their imports. So it doesn’t change my overall bullish outlook on the industry,” Gilmore said.

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