LNG in World Markets Featured Article

Spot LNG freight rates continued to rise in firsthalf September on higher seasonal demand, although fixing activity slowed partly as industry players focused on a major LNG conference held in Singapore early in the month. Incremental floating plays are also offering support. Market players continue to monitor LNG plants in Australia and the US for potential sustained production disruptions.

Spot charter rates ranged from $120,000/d to $210,000/d depending on vessel type, with Pacific and Atlantic Basin rates at parity, in the week ending Sep. 15 (see Table and Chart on the next page).

Term one-year charter rates for M-type electronically controlled gas injection (MEGI) and X-DF vessels were assessed at $120,000/d in the week ending Sep. 15, down from $125,000/d two weeks ago. Tri-fuel diesel electric (TFDE) and dual-fuel diesel electric (DFDE) rates were assessed at $95,000/d, down from $100,000/d two weeks earlier, while those for steam turbine vessels were assessed at $50,000/d, unchanged from two weeks ago.

Spot charter rates have been propped up as fixing focus shifts to the northern hemisphere peak-demand period. Spot charter enquiries are now mostly for October and early November laycans. There is spot freight interest and some fixing in both the Pacific and Atlantic Basins. India’s Petronet is seeking a spot charter for a Ras Laffan loading in mid-October via tender, sources said.

Spot Charter Rates

The firm is seeking a vessel with up to 155,000 m3 capacity, with bids due on Sep. 18. Petronet is one of just a handful of buyers that lifts free-on-board (FOB) supply from Qatar.

At least one more October spot charter is being sought in the Pacific, sources said.

Spot freight interest has emerged that is related to a couple of FOB cargo sell tenders issued since early September. Oman LNG awarded, in end-August, a second-half October loading cargo, possibly to Trafigura. Algeria’s Sonatrach, meanwhile, is heard to be marketing a prompt mid-September loading cargo from its Skikda plant. The firm had awarded via a tender an early October FOB cargo that will be brought to Europe.

A firm price contango structure in LNG cargo markets continues to encourage floating storage plays, which should increase tonmiles. There are some 840,000 tons of LNG on vessels floating for seven days or more, according to Kpler data as of Sep. 15, a significant jump from 150,000 tons a month prior.

There were concerns that typhoons in first-half September could have increased the time taken to discharge cargoes at terminals in Hong Kong, Taiwan and southern mainland China – hence lifting ton-miles. But such impact has been negligible, sources said.

LNG Carrier Freight Rates Snapshot – $/day

There are several potential downside risks to spot charter rates. Freeport LNG suffered a dip in feedgas flows from around Sep. 9, although levels are now rising. Some loadings were affected, which caused a vessel build-up at the plant.

There are around four unladen LNG ships waiting near the Freeport LNG facility, at least three of which had been idling for over six days as of Sep. 15 following likely cargo cancellations. They are the Uniper-controlled LNG Schneeweisschen, the Hellas Diana fixed to Trafigura, TotalEnergies’ SK Resolute and the Marvel Crane taken by BP. Pavilion Energy’s BW Pavilion Aranda, meanwhile, has docked at Freeport for loading.

Elsewhere, Australia’s Gorgon LNG and Wheatstone LNG plants continue to be monitored for potential strike action that could disrupt production over an extended period. Loadings, however, remain unaffected for now.

Tonnage availability remains limited as subletters hold on to ships for their own positions. There are 10 LNG vessels available for prompt charters in the Pacific as of Sep. 8, but six of them are steam turbine tankers that are more polluting and less efficient.

The Panama Canal remains congested. LNG ships without pre-booked slots must wait around two weeks to transit in both directions, according to port data as of Sep. 14.

There are some multi-month and multi-year term charter discussions, but fixing remains limited. Charterers, however, may be motivated to lock in rates for term charters soon before sentiment turns more bullish. Enquiries are focused on 2024 covers, although talks remain ongoing for time charter parties of around five years.

Jove eyes sale of two LNG newbuilds

 Chinese private-sector firm Jovo Energy is looking to sell two small-sized LNG newbuilds that it ordered in 2018, sources said. The ships are now being constructed at China’s Jiangnan Shipyard, which secured the orders after a tender process.

Jovo has begun seeking offers for the first ship – the 80,000 m3 Mulan Spirit that was named in February this year. The other vessel – also 80,000 m3 in capacity – is still unnamed.

The Mulan Spirit is scheduled for delivery in 2024. Jovo is reportedly targeting a sale price of around $175 million for the ship, a mark-up from the newbuild cost of this size of around $120 million at the time of signing. The small ship size, however, could limit buyers’ appetite, sources said.

Jovo bought at least three existing small-sized LNG carriers in the past three years, all of which have steam-turbine propulsion.

LNG newbuild sales have been limited lately, as owners hold on to tonnage amid a tight shipbuilding market and limited newbuilding slots. There are also fewer speculative orders due to high shipbuilding costs, with most ships tied to LNG projects or long-term contracts. A conventional-sized LNG newbuild vessel currently costs around $260 million, up from some $200 million 1-2 years ago.