Wogan is anticipating that the combined entity of HHI and DSME may face pressure to increase LNG carrier newbuild prices, as yard capacity is filling up with LNG orders and stretching newbuild completion to 2.5-3 years.
“I think actually certainly having two major players rather than three is probably going to put some pressure on pricing over time,” Wogan said.
“As you see more of this capacity taken, that pushes out when the yards are able to build the ship, and also makes the yards more comfortable. So as they move to three years plus in terms of that order backlog, that again gives them more confidence to push on the pricing,” Wogan explained.
“So I think we'll continue to see that as a factor. And I think you'll continue to see the shipyards pushing the pricing up, albeit probably more incremental than a huge step change at this point,” he added.
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He noted that the rise in LNG carrier newbuild prices is already happening in the market, though they are not as pronounced as GasLog had expected.
“I think part of that reason is that you need other shipping areas to also be ordering at the same time (…) and we haven't seen the big orders from container vessels, et cetera, which we may well have expected. But nevertheless, we've seen a slow increase in the values,” he observed.
Looking beyond 2020, additional shipping capacity will be required if consensus LNG demand and supply forecasts are realised.
Wood Mackenzie has estimated compound annual growth in LNG demand of 6% between 2018 and 2025, and 2019 is anticipated to be the strongest year ever for supply growth with an expected increase of 40 mtpa to 366 mtpa, a 12% increase on 2018.
“Whilst we now believe that the LNG shipping market is heading towards a balanced state early next decade, the long term secular growth of LNG supply and demand mean that, over the medium and long term, GasLog will continue to serve a dynamic and growing industry,” Wogan commented.
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