Drewry cuts freight rate outlook for LNG shipping

For illustration only (Image: Shell)

Given the mounting pressure on freight rates and continuing fleet growth over the next two years, excess LNG tanker supply will reduce only gradually with the recovery in rates pushed back to the latter part of next year, according to the shipping consultancy, Drewry.

The consultancy maintains a bearish stance on the LNG shipping freight rate outlook for 2017 on account of strong fleet growth which is expected to be around 13%, Drewry said in its latest edition of the LNG Forecaster report.

The movement in rates has so far been in line with Drewry’s expectations, as rates have been falling since the beginning of the year.

The spot rate for dual-fuel diesel-electric (DFDE) vessels (East of Suez) is currently around $26,000 per day, compared to $37,000 per day in the beginning of the year, a fall of 30%, it said in the report.

“The tremendous weakness observed recently in the freight market highlights the ample vessel supply. We are anticipating two years of aggressive fleet growth with supply expected to expand a further 9% in 2018 which will extend the period of weak freight rate development into next year,” Shresth Sharma, Drewry’s lead LNG shipping analyst said in the report.

“Therefore, we do not expect rates to start recovering until the end of 2018 when several new LNG trains from the US are expected to be operating at full capacity,” said Sharma.

“As a result, we have trimmed down our forecast for average spot freight rates in 2018 to $40,000pd from the earlier expectation of $50,000pd,” he added.

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