Tradewinds: Poten Certain LNG Shipping is Sailing to Balanced Future

05 Jun 2015: “Gas broker and consultants Poten & Partners forecasts that the LNG shipping market is likely to return to balance in two years. “Poten LNG shipbroker Steen Kyvsgards told delegates at the Madrid LNG & Shipping Forum 2015 that the company’s model estimates the current LNG shipping market for vessels available for charter for three months plus is structurally long by around 36 vessels of 160,000 cbm. Kyvsgards says 111 million tonnes per annum (mtpa) of new liquefaction capacity was due to come online by 2018, most of it from the US and Australia. Comparing this with the ships coming back or onto the market, he says the industry could expect to see a balanced market, with a slight surplus of vessels by 2017.But he cautioned: ‘Whether that number is five, eight or zero, nobody knows.’ Moving into 2018, Poten’s figures show a possible deficit of 28 LNG carrriers. But the company does expect more orders to be placed in the interim. ‘The important thing is the trend,’ Kyvsgards said. ‘We are probably here at the worst time and, from now on, things can only improve from a shipowner’s perspective.’ Kyvsgards says the LNG shipping market had changed significantly over the past five to six years. “He claims 29% of all LNG business is now done on spot or short-term contracts. He attributes this to the increase in trade routes and the development of new concepts, such as cargo diversions, reloads and the advent of counter-cyclical markets. The Poten broker details that today there are 145 LNG newbuildings on order — 18 of which are uncommitted. A total of 244 million tonnes of LNG was traded in 2014, with 64 million tonnes estimated for the first quarter of this year. He says today’s LNG shipping rates were down at “minimum levels” — close to where the market was in 2010. Kvysgards explains that the movement of LNG charter rates show a close correlation to the arbitrage between the different LNG trading basins. Poten’s calculations demonstrate that at least 58% of the rate development can be explained by the arbitrage. There is a time-lag between the movement of the arbitrage and vessel rates, which Poten estimates to be around three weeks. When this is factored in, it raises the correlation figure to nearer 64%. There is also a closer relationship between the two during the summer period and in a market that is short on tonnage. But Kvysgards says other market events could interrupt this relationship.”