“Dizzying heights” are reached in freight prices for liquefied natural gas carriers as reported by Freight Waves.
Deals reach halfway point
On September 26, Pareto analyst Eirik Haavaldsen forecasted that liquefied natural gas transportation rates could surpass $1 million per day in the fourth quarter. According to a study released on Monday, at least some deals have reached the halfway point.
It would seem absurd to pay $1,000,000 per day. But in the end, it all boils down to how much money a shipper can make on a load. A shipper can pay six figures in freight daily if they can generate $200 million in profits shipping a single shipload of LNG. Or seven, if Pareto is correct.
New high for LNG shipping rates
It’s not even winter yet and short-term LNG shipping rates are already in record territory, not just for LNG shipping but for any commercial shipping sector ever.
And these rates are expected to keep climbing.
Clarksons Securities put average voyage rates for the most efficient LNG carriers — those with two-stroke propulsion known as MEGI or DXF carriers — at $313,000 per day as of Monday.
“LNG carriers are shooting for the stars.
Spot earnings have reached dizzying heights,” Clarksons Securities analyst Frode Mørkedal wrote.
According to brokers, owners can now achieve three-way economics, which means they are compensated for a regular round voyage and positioning voyages.
War effect
Rates have gone into the $300,000s per day on occasion in the past two winters.
But the current market situation is unprecedented.
Gas supplier Russia is at war, it has shut off supplies to Germany, and someone just sabotaged two pipelines in the Baltic.
According to Mørkedal, “Brokers note that charterers and holding onto tonnage instead of subletting due to the exceptionally high cargo profits, which makes the optionality of having a vessel ready more lucrative than subletting the vessel in the spot market.”
This is increasing interest in floating storage.
The upper limits of spot rates
Extraordinarily high day rates have been seen in multiple bulk commodity shipping markets through the years.
Rates for Capesize bulkers reportedly surpassed $200,000 per day in June 2008.
When the freight rate reaches the point where it erases the profit margin on the commodity cargo, the shipper simply refuses to book the trip.
“There’s no cap until the freight becomes high.”
Scorpio Tankers (NYSE: STNG) President Robert Bugbee noted that his company fixed tankers on individual voyages this summer at over $100,000 per day “and not one time have we had phone calls from the heads of BP or Shell ringing up and saying, ‘What the hell are you doing screwing our guys over?’”
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Source: Freight Waves
