According to SFOC, the LNG , shipbuilding industry is ramping up production of new carriers, seemingly disregarding the global shift toward a low-carbon economy, according to a new analysis. The report, Still Adrift: Updated Assessment of the Global Energy Transition’s Impact on the LNG Shipbuilding Industry, released by Climate Analytics and commissioned by Solutions for Our Climate (SFOC), highlights the increasing oversupply of LNG carriers. Since the previous year’s report, there has been an increase of 16 million cubic meters in planned shipping capacity.
The analysis reflects projections by the International Energy Agency (IEA), which has consistently revised downward its global fossil gas demand forecasts. The IEA’s most conservative scenario, which accounts for current policies and private sector momentum without heightened climate ambitions, predicts a peak in global gas demand by 2030. However, the LNG shipbuilding industry continues to expand, with significant new orders for carriers planned through 2025 and 2026.
IEA Scenarios and LNG Shipping Oversupply
The report finds that under both the IEA’s Net Zero Emissions (NZE) pathway and its more conservative Stated Policies Scenario (STEPS), no new LNG carriers are needed. These scenarios, which align with the global goal of limiting temperature rise to 1.5°C and reflect existing government policies, indicate a clear decline in fossil gas demand.
Despite these projections, the LNG shipbuilding industry is moving in the opposite direction, with 180 new carriers expected to be delivered between 2025 and 2026, representing 28% of the 2023 fleet’s capacity. In 2023 alone, 64 orders for LNG carriers were placed, with 55 new orders made in the first five months of 2024. Since then, an additional 27 orders have been confirmed, pushing the industry toward oversupply.
Financial Risks and Stranded Assets
The report warns of significant financial risks associated with this oversupply. Even under the IEA’s conservative scenario, the LNG shipping industry is projected to experience a surplus of 40% by 2030, equivalent to 275 modern carriers. As global energy transition accelerates, this could lead to stranded assets, with new carriers becoming obsolete long before their anticipated operational lifespan. Investing in fossil fuel transport capacity is increasingly seen as a risky and shortsighted move that threatens the financial stability of shipbuilders, investors, and shipowners.
The Role of China and South Korea in LNG Shipbuilding
China and South Korea are leading the construction of new LNG carriers, with South Korea dominating the market. However, the report suggests that South Korea is well-positioned to shift its focus to renewable energy shipbuilding, such as manufacturing vessels for wind turbine installations. This transition would align with global sustainability trends and offer South Korea’s shipbuilding industry a way to decouple from the declining fossil fuel sector.
A Call for Immediate Action
The report urges stakeholders in the LNG shipping industry to halt new orders and reconsider their investment strategies. With the energy transition gaining momentum and demand for fossil fuels set to decline, continuing to build LNG carriers risks pushing the industry into an unsustainable oversupply situation, with severe economic consequences. The time to pivot toward more sustainable shipbuilding practices is now.
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Source: SFOC
