Earnings for liquefied natural gas shipping will stay under pressure this year as accelerating fleet growth and changing trade patterns will weaken supply-demand conditions, shipping consultancy Drewry said in a report.
LNG vessel fleet growth is forecast to double in 2016 to 12%, compared to 6% in 2015. Meanwhile, as new sources of LNG supply kick in from projects coming online in Australia, demand for spot cargoes from the Middle East are expected to weaken which will “adversely affect overall tonne mile demand for LNG shipping“, Drewry said in its “LNG Forecaster” report published on February 3.
According to the report, the final quarter of 2015 was disappointing for LNG shipowners, despite a seasonal uplift in demand for winter fuels. Drewry estimates that average spot rates in the quarter were $30,000 per day for East of Suez shipments, which was unchanged from the third quarter and 57% down on the previous year. The pressure on rates was principally due to
The pressure on rates was principally due to oversupply of vessel capacity, as LNG trade actually grew over this period thanks to new LNG plants coming online. Drewry estimates that total fourth quarter trade totalled 61 million tonnes, up 6% quarter-on-quarter, and accounted for 88% of global liquefaction capacity.
Spot vessel availability remained high throughout the quarter which kept rates from rising. Drewry’s research indicates that there was an excess supply of 38 vessels in the final quarter, three vessels higher than in the third quarter. Vessel oversupply was exacerbated by the fact that four new ships joined the fleet during the fourth quarter.
In the year ahead, vessel deliveries are expected to accelerate to 53 while demolitions will be limited to just three, Drewry said.