The pressure on LNG shipping spot rates will continue for another year on account of strong fleet growth, before strengthening in 2019 with slowing fleet growth and strong trade.
Spot rates (East of Suez) for modern LNG vessels averaged $33,000 per day in the nine months to September 2017, an increase of 5 percent compared with the same period last year.
While current spot rates are enough to cover operating costs of around $15,000 per day, they are still below breakeven, which ranges between $45,000 per day and $60,000 per day, according to the latest edition of the LNG Forecaster report published by global shipping consultancy Drewry.
Drewry calculates that the global spot fleet will make aggregate operating losses of $230 million in 2017. Shipowners with substantial spot market exposure face continued challenges as Drewry expects pressure on the freight market to continue in 2018 on account of strong fleet growth.
“Having said that, we maintain our long-term bullish outlook for LNG shipping as fleet growth will slow down to 4 percent in 2019, from an average annual rate of 10 percent in 2017 and 2018 and trade growth will remain healthy at around 6.5 percent a year in 2019 and 2020,” a Drewry analyst said.
Much of this trade demand will be driven by emerging and growing markets. Although the demand potential of individual markets in Pakistan, Thailand, Bangladesh, the Philippines and Myanmar, might not be as great as China or India, their combined demand will be a strong driver of future LNG trade.
“According to our calculation the combined imports of these five countries would be around 32 million tonnes in 2020, creating demand for between 25 and 30 LNG carriers,” the analyst said.