HIgh LNG Freight Rates Possibly Short-term

Market analysis suggests winter demand could cause LNG freight rates to rise but downward pressure might later be forthcoming.

Rising LNG prices, almost stagnant liquefaction capacity amid expanding regasification capacity and development of LNG export framework in the USA could prove to be the game changers for the LNG industry, according to shipping analyst Drewry.



Looking at the LNG freight market a new report Drewry Maritime Research - LNG Shipping Market Review and Forecast 2012 says that the short-term rate assessments for conventional LNG carriers have been incredibly positive. Since the last market low in 2Q10 the rates have almost quadrupled with only a slight softening in 2Q12. It is expected that winter demand could provide the momentum needed for the rates to continue their climb.

However, with only 4.5 million tpaof liquefaction capacity expected to come on line in 2013, and 25 vessels scheduled to be added to the current fleet, Drewry cautions that tight tonnage supply might not last long. Rates might face downward pressure soon if supply concerns and rising LNG prices are not addressed.



However, in the long run and based on liquefaction capacity addition plans, a lot more vessels are needed than are provided by the current orderbook, according to Drewry. New ordering will continue, the analyst says, provided finances are available.


Source: Drewry Maritime Research