Copenhagen: The LNG shipping market 'dipped to historic lows earlier this year' as a result of the recession and production plant delays, shipping association BIMCO reports. 'However, the sector is emerging from its nadir and beginning a slow recovery.'
The sector suffered record-low freight rates in the spot and short-term LNG trades in spring 2009. Of note was limited demand from Japan and Korea, two Asian nations that between them account for nearly one-half of the global trade in LNG. 'Korean and Japanese imports so far in 2009 are running at approximately 7-8% below the levels of the same period a year earlier. This represents an unprecedented drop in LNG demand in the two countries,' BIMCO wrote.
A record annual total of 54 ships were delivered to the LNG fleet during the course of 2008. Combined with delays to the planned start-up of many new LNG production plants, this surge in shipping capacity was already putting pressure on short-term LNG freight rates prior to the onset of the financial crisis. For most of 2008 shipowners were accepting USD 40-50,000 per day for their LNGCs, well down on the peak levels of around US$80,000 per day secured for a brief period in September 2007. Freight rates continued to tumble during winter 2008-09 and by May 2009 brokers were quoting rates as low as USD 25,000. ?The 54 new ships delivered in 2008 pushed the global LNG carrier fleet up to the 300-vessel mark in January 2009, twice the number of ships that were in service in January 2004. At the start of this year the LNGC orderbook stood at 82 ships, some 45 of which were due for delivery in 2009. ?The principal redeeming feature of the LNG carrier market last year was the longer distances that ships travelled, primarily as a result of vessels loading in the Atlantic Basin being diverted to Asia following the collapse in demand for US LNG imports. A recent study on the LNG shipping market by Wood Mackenzie states that in tonne-mile terms global trade in LNG expanded by 7.4% in 2008. ?The prop offered by cargo diversions disappeared in winter 2008-09 when Japanese and Korean LNG imports began to slump. An estimated 10% of world LNG carrier capacity was surplus to requirements by early 2009. Industry responded by putting a handful of vessels into layup, idling others and using some ships to temporarily store LNG to take advantage of seasonal and regional gas price fluctuations. ?Taking up the slack ?On a more positive note the delayed liquefaction plants have finally started to come on stream in recent months and a total of 40 million tonnes of new LNG production capacity is expected to be in place by the end of 2009. The new projects are pulling their earmarked ships into service and helping to ease the LNGC fleet overcapacity situation. Short-term freight rates, in turn, have recovered to some extent and are now averaging around USD 40,000 per day. ?Ship oversupply has also been eased, albeit marginally, by the conversion of conventional LNG carriers into floating storage and regasification units (FSRUs) to enable the use of the vessels as LNG import terminals. Two such conversions have already been carried out, two additional projects are going ahead and further options that would give existing ships a new lease of life as FSRUs are under review. ?'The recovery of the LNG shipping market over the next few years will be slow and tentative but the continued availability of surplus tonnage, low gas prices and competitive freight rates will encourage a rebound in spot and short-term trading,' BIMCO maintains. [05/10/09]
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