- LNG shipping rates to soften in 2024-2025 but recover from 2026-27 due to structural changes, fleet expansion, and supply-demand rebalancing.
- Strong Asian demand, coupled with US-Asia trade, has helped support rates, though European demand remains subdued.
- Geopolitical risks, fleet demolitions, and new capacity additions will play a crucial role in determining LNG rates in the coming years.
Drewry reports that it expects 66 LNG carriers (LNGCs) to join the fleet this year, while 94 LNGCs are scheduled to be delivered in 2025, inflating the fleet amid easing vessel demand due to limited new capacity addition.
2024 LNG Shipping Market Trends
LNG shipping rates in 2024 have been lower this year than the 2022-23 highs but are still healthier than the pre-2019 levels.
Rates have remained flat due to subdued European demand, owing to ample inventory (93% full as of September), higher renewable and nuclear output, weak gas demand, and futile revival of industrial growth.
Asia’s Role in Supporting Rates
Strong Asian demand due to extreme summer, along with China’s revived economic growth, boosted the role of LNG in power generation.
Japan’s LNG imports strengthened during August-September despite the increasing role of nuclear energy in the power sector. Lower LNG prices supported the demand in price-sensitive countries such as India, Bangladesh and Thailand.
US-Asia Trade Boosts LNG Shipping
The US shipped LNG to Asia via the COGH as Asian prices (despite being lower than in previous years) were at a premium over TTF, coupled with lower shipping rates. As a result, the US-Asia trade also spiked in 2024 over previous levels.
All these factors have supported rates this year, and we expect a similar trend to continue in 2025.
Europe Prepares for Winter with High Inventory
Drewry is bullish on winter demand as La Nina will result in severe winters. However, Europe’s high inventory, which was 94% full as of 4 October 2024, will allow the continent to enter the season with about 100% storage well ahead of its November target.
Drewry expect rates to reach their year-high by December. Therefore, we anticipate rates to strengthen in 4Q24 and rally in 1Q25, followed by a slowdown in the subsequent quarters.
Impact of Geopolitical Risks on LNG Shipping
Any escalation in the Middle East due to the ongoing tensions and conflict could spike LNG prices and rates.
Robust LNG demand from China, Japan, and South Korea will intensify the competition between Europe and Asia and support LNG rates in the winter.
Long-Term LNG Shipping Rate Recovery
Demolitions will pick up in 2025 as fleet supply will outpace liquefaction build-up, compelling shipowners to scrap older vessels. This will provide some respite to the ‘oversupply’ conditions.
However, much of the rebalancing will occur post-2026, with massive capacity additions and higher scrapping amid increasing scrutiny over methane slippage and GHG emissions.
Ample supply by 2027 will ease LNG prices (we expect them to be around $6-7 per MMBtu), making it affordable and accessible, boosting global LNG demand- especially in China, South and Southeast Asia, and South America.
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Source: Drewry
