Strong LNG Demand to Keep Freight Rates Firm in 2022, Beyond

Tanker rates to ship liquefied natural gas (LNG) are expected to remain firm as market players try to secure cargoes for winter demand amid soaring LNG prices and tight global supply, industry sources said on Friday.

The global LNG market has recently tightened further after the war in Ukraine and a major outage at major U.S. facility Freeport LNG curtailed U.S. LNG supply, pushing players to secure vessels for longer terms that extend at times to a year.

Spot tanker rates across the Pacific hit a record high at $335,000 per day in November and remained strong following Russia's invasion of Ukraine; however, Freeport's outage has enhanced vessel availability and helped ease prices, however it remains higher than in previous years.

"Winter coverage and (long) term is still very bullish, as people are seeing that the market might be very tight and unpredictable," said Tuomas Maljanen, Associate Director of LNG at shipbroker firm Fearnleys.

Europe's imports of LNG so far this year has been more than 60% higher than its year-ago level, as the continent seeks to phase out Russian gas. On the other hand, Asian players sought to secure uninterrupted supply ahead of summer where heat wave is affecting large areas of North Asia.

LNG freight spot rates for the Atlantic were estimated by pricing agency Spark Commodities at $46,750 per day and Pacific rates at $55,500 per day on Friday.

However, Spark Commodities forward LNG freight rates for the fourth quarter of 2022 were marked at $156,000 per day, a jump from $65,916 per day in the third quarter and from $22,865 per day in the first quarter.

Longer term LNG freight for average calendar rate for 2023 were marked at $95,917 per day, with around $86,000 per day between 2019 and 2021.

The outlook for firm freight rates also come amid expectations of strong new building orders for LNG vessels, which have already surpassed 100 this year so far, said Fearnleys' Maljanen.

"This year alone we've had an unexpectedly massive order book. I don't think it's going to end. I think the second half of this year we're going to see more ordering done as well, This is all based on deliveries from 2026 onwards. 2025 is already fully booked," he said.

(Reuters - Reporting by Emily Chow and Aizhu Chen; additional reporting and writing by Marwa Rashad; Editing by David Evans)