- Oversupply Pressures Persist as Fleet Growth Outpaces Demand.
- Scrapping Steam Turbine Carriers Key to Stabilising LNG Rates.
- China and Asia Drive LNG Demand Amid Regional Variability.
Drewry expects LNG shipping rates to normalise in 2025 due to fleet growth outpacing liquefaction capacity. On the supply side, demand is expected to recover globally, but various factors will influence the market, such as unpredictable weather patterns, LNG price fluctuation, competition from alternative energy sources, and the global shift toward carbon neutrality. Even with new projects coming into operation, supply constraints will keep prices vulnerable to shocks, and persistent geopolitical risks will worsen, reports Drewry.
Rates Under Pressure
LNG shipping rates are to fall further in 2025. The market will have to contend with the delivery of 96 LNG carriers, and the oversupply will add to it. At the same time, the expected 42 million tonnes per annum of new liquefaction capacity will not be enough to absorb the fleet’s expansion. Demand remains regionally inconsistent, with a modest recovery expected in Europe, while Asia solidifies its position as the primary growth driver. The severity of Europe’s LNG demand in 2025 will largely hinge on the conditions at the end of the 2024-25 winter.
Evolving Demand and Supply Dynamics
China is likely to continue to be the world’s biggest LNG importer in 2025 despite economic challenges. Increased usage of LNG in power generation and industrial use will also contribute to the growth in demand in Asia, while easing LNG prices will also support this growth. The demand for LNG in Europe might, however, be capped by the availability of alternatives like renewables and nuclear power besides an increased push toward carbon neutrality.
On the supply side, the United States will be in the lead with new production volumes. Key projects such as Plaquemines LNG and Corpus Christi LNG Phase 3 are going to be brought into operations, and Canada’s entry into the global LNG market with a 13 mtpa capacity will further enhance supply. Still, the added capacity will fall short of bridging the gap created by the rapid growth of the fleet.
Trends of Scrapping and Market Stabilisation
As oversupply weighs heavy on the market, an increased scrapping volume is forecasted for 2025. Many steam turbine LNG carriers will be retired due to poor employment opportunities. This is an approach through which the market could get stabilised, though important scrapping volumes will have to take place to reach the much-desired supply-demand equilibrium.
Opportunities Through Challenges
While the rate outlook for 2025 appears grim, there are potential silver linings. Higher trade volumes between the United States and Asia could provide support for LNG shipping, as could the continued preference for the Cape of Good Hope as a transit route amid unresolved disruptions in the Red Sea. Additionally, LNGC transits via the Panama Canal are expected to remain steady, contributing to some stability in the market.
Next Wave of FIDs
The momentum for FIDs decelerated in 2024 with a large amount of regulatory hurdles, especially within the United States, with export permits delayed. This is expected to pick up in 2025-26. Easing of regulation following the re-election of Trump should spur FID activity within the latter half of 2025, but it will be necessary to confront challenges such as financing, environmental compliance, and requirements for vessels. As a result, the crest of the new wave of FID is most likely to occur toward the end of 2025 and throughout 2026.
Pervasive Geopolitical Risks
Geopolitical tensions will remain a key factor influencing LNG markets in 2025. The conflict in Europe is far from resolution, and tensions in the Middle East continue to fuel global instability. These risks will add further complexity to an already difficult market environment, keeping LNG prices and shipping rates under pressure.
Despite all of these headwinds, 2025 will present for LNG shipping a very challenging and complicated environment against which to operate – challenging and complicated in equal parts.
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Source: Drewry
