Rising Ship Supply Helps Ease LNG Charter Rates

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  • Limited availability drove to high LNG shipping rates
  • Rates remained high for most of this year, hitting around $195,000 last month.
  • Prices are falling as more ship are available for spot charters.

Inflated spot charter rates for liquefied natural gas (LNG) tankers are easing as more ships becoming available, which could help increase LNG trade if Asian demand rises in coming months says Ekaterina Kravtsova for Reuters.

How was rate inflation handled?

LNG charter rates are a key component of spot LNG trade, dictating the way the super-cooled gas is transported. Charter rates usually follow the price of LNG, which has fallen since September due to sluggish demand from Asian buyers.

Rates have remained high for most of this year, hitting around $195,000 last month.

Due to inflated shipping rates, not many spot Atlantic cargoes travelled east in the recent months. Some companies had to arrange cargo swaps in order to reduce costs.

Reason for fall of rates  

As more vessels become available for spot charters, rates have dropped to around $160,000 per day at the end of November, shipbrokers told Reuters.

One source said the spot rate for a modern vessel reached $140,000 per day on 4 Dec 2018.

Availability of vessels

Four ships became open on 3rd for December charter, an industry source said. Another predicted that overall up to 10 will become available for charter this month, with more coming to the market after floating cargoes are unloaded.

Additionally, Chinese energy major CNOOC Ltd. offered late last month to charter out the British Emerald LNG tanker after it hired the ship from oil and gas company BP earlier this year, two shipbrokers in Singapore said.

Commodities trading firm Trafigura was offering the Gaslog Santiago tanker for up to three months from early December, the industry sources said.

Rates still high against 2017

However, rates are still higher than last year’s level, between the months of December and March, when they were mostly below $100,000 per day.

“Shipping [rates are] very high, [meaning] there is not much room for work at the moment,” an LNG trader said, referring to how this had limited movements from the Atlantic to the Pacific basin.

Rates likely to fall

Demand for early next year is still mostly from the Asia-Pacific basin, such as U.S.-based ExxonMobil, Global mining and resources company BHP and the Australia Pacific LNG project which are looking for ships to load from Australia-based export plants in the first half of January.

But some shipbrokers said charter rates will likely continue to fall, as supply could outweigh demand.

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Source: Reuters

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