LNG Freight Rates Plummet as Ship Surplus Hits Spot Market Hard

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  • Asia-Pacific LNG freight rates have dropped to historic lows, with two-stroke ships losing $7,000-$8,000/day.
  • New-build deliveries and delayed LNG production projects are exacerbating the ship surplus in the spot market.
  • Despite firm LNG cargo prices, operators face cash flow challenges, and the industry grapples with balancing short-term oversupply and long-term project commitments.

Asia-Pacific LNG freight rates have fallen to unprecedented lows, raising concerns about ship layups amid a surplus of tonnage and delayed production projects. Two-stroke LNG carriers on the US Gulf-Europe route are losing $7,000-$8,000/day, highlighting the financial strain on operators, reports SP Global.

Freight Rates Hit Record Lows

LNG freight rates for tri-fuel diesel-electric (TFDE) carriers in the Asia-Pacific have dropped below $10,000/day, just 14% of their mid-August 2024 levels.

Platts data indicates that two-stroke carriers now fetch $14,000/day, significantly down from $90,000/day in early 2024.

Ship Oversupply and Layup Concerns

The LNG shipping market faces a surplus of vessels, exacerbated by the delivery of 70 new LNG carriers in 2024 and an additional 80 expected in 2025.

With insufficient cargo to meet demand, operators are exploring layup options, especially for less fuel-efficient ships.

Impact of Delayed LNG Projects

Delays in major LNG production projects, caused partly by a US moratorium on export permits in early 2024, have pushed more ships into the oversupplied spot market.

Although the moratorium was lifted in January 2025, investor hesitancy has already set projects back by 1-2 years.

Ballast Bonus Decline

The ballast bonus, which compensates ships for returning empty to hubs, has started to decline and may disappear entirely if freight rates remain low.

Brokers report that the bonus, once at 100%, is now a significant casualty of the current market conditions.

Long-Term Charter Stability vs. Spot Market Struggles

While the long-term time charter market remains relatively stable, spot market operators are hit hardest.

Many ships relet by long-term charterers at higher rates are now underperforming, causing cash flow issues.

Firm Cargo Prices Amid Surplus

Interestingly, LNG cargo prices remain firm due to strong demand for intra-regional movement and delayed production projects limiting gas supply.

However, weak freight rates have eroded trading margins, further straining operators.

Future Outlook

The LNG order book includes 350 ships set for delivery over the next six years, potentially aggravating the surplus.

With new building contracts tied to delayed projects, the market must navigate a precarious balance between short-term oversupply and long-term commitments.

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Source: SP Global