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LNG shipping rates forecast to stay under pressure in 2016: DrewryLNG shipping rates forecast to stay under pressure in 2016: Drewry

Shipping rates for LNG carriers are expected to stay under pressure this year due mainly to increasing tonnage growth and changing trade patterns that could weaken the supply-demand conditions, according to a research report by shipping analyst and consultant Drewry.

Lee Hong Liang, Asia Correspondent

February 4, 2016

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The global LNG carrier fleet growth is forecast to double this year to 12% compared to 6% in 2015. New sources of LNG supply from projects coming online in Australia are reducing demand for spot cargoes from the Middle East, leading to a negative impact on overall tonne-mile demand for LNG shipping, the report mentioned.

“Vessel oversupply is the key problem for LNG shipping in 2016,” said Shresth Sharma, Drewry’s lead LNG shipping analyst. “Meanwhile, growing LNG supply in Asia-Pacific will reduce the dependency of Asian buyers on Middle Eastern supply which will weigh on tonne-mile demand, diminishing overall LNG shipping demand. Hence, we see no let-up in vessel overcapacity, which will continue to put pressure on earnings through 2016.”

LNG shipowners experienced a disappointing final quarter of 2015 despite a seasonal uplift in demand for winter fuels.

According to Drewry estimates, average spot rates during the quarter were $30,000 per day for East of Suez shipments, unchanged from the third quarter and down 57% year-on-year.

The pressure on rates was chiefly due to oversupply of vessel capacity, as LNG trade actually grew over this period thanks to new LNG plants coming online. Fourth quarter trade totalled 61m tonnes, up 6% quarter-on-quarter, and accounted for 88% of global liquefaction capacity, Drewry figures showed.

The research report further pointed out that spot vessel availability remained high throughout the final quarter, and there was an excess supply of 38 ships. The vessel oversupply was magnified by four new ships joining the fleet during the fourth quarter.

In the year ahead, vessel deliveries are expected to accelerate to 53 while demolitions will be limited to just three, Drewry suggested.

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About the Author

Lee Hong Liang

Asia Correspondent

Singapore-based Lee Hong Liang provides a significant boost to daily coverage of the Asian shipping markets, as well as bringing with him an in-depth specialist knowledge of the bunkering markets.

Throughout Hong Liang’s 14-year career as a maritime journalist, he has reported ‘live’ news from conferences, conducted one-on-one interviews with top officials, and had the ability to write hard news and featured stories.

 

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