Spot market prices for LNG tankers this week set annual records, with more long-term leases; This limited the supply of ships to the spot market.
This was caused by increased demand for LNG and buyers’ shunning of Russian cargo and ships, following its invasion of Ukraine, according to Putin & Partners, a ship brokerage and LNG consultancy.
The company confirmed that the fire that destroyed the US Freeport plant to process and export liquefied gas did not affect the increase in spot prices, and the plant will remain suspended until the end of the month at least .
Long Term Rentals
Spot prices for 160,000 cubic meters of LNG in the Atlantic Basin are $100,000 per day, and $85,000 per day for shipments to Asia or east of Suez, Jason Fair, head of business intelligence at Putin & Partners, said.
Both prices increased significantly compared to the average for the year, as the average for the year so far in Asia is $ 49,000 per day, and daily prices fell in March, and have been very strong since May, according to information monitored by the specialized energy platform.
Fair emphasized that “there has been a significant increase in long-term leases”; Which led to the withdrawal of capacity from the spot market.
“We’ve seen some leases for 10 years, which we haven’t seen in many years,” he added. Buyers who struggled with transportation in the last two winters have turned to long-term rentals.
He noted that fewer ships will exit charter flights in the coming months; This keeps supplies short.
“The Freeport LNG outage should have had an impact…Loss of supply anywhere means a loss of demand, but we haven’t seen that,” Fair said.
Instead, he explained, spot cargo prices rose last week by 4% to 30%, depending on the size and location of the vessel.
Liquefied Gas Carriers
The world’s largest gas traders are scrambling to secure LNG tankers before winter arrives, after sanctions against Russia – following its invasion of Ukraine – reshaped global energy flows.
The rush on ships usually occurs in late summer in the northern hemisphere, but this year it has already begun, and traders are seeking to cut prices by agreeing to longer charters, according to industry executives.
The scramble to secure LNG tankers comes ahead of new regulations for global shipping emissions next year; This could lead to a further drop in supply, according to the Financial Times.
It also comes as shipyards in East Asia struggle to launch new LNG tankers fast enough.
An Early Rush… And A Crunch Of Capacity
Ship owners and LNG brokers have reported an unusually early annual scramble for companies such as Britain’s Shell, France’s Total Energy and China’s Unipec to secure enough cargo capacity to transport ultra-cooled fuels during peak winter demand.
Prices for a one-year LNG tanker charter traded near a decade high of $120,000 a day in early June, up more than 50 % from a year ago, according to Clarksons Plateau Securities.
The market boom comes after the European Union pledged to reduce its dependence on Russian gas by two-thirds by the end of the year, and import an additional 50 billion cubic meters of liquefied natural gas.
As the capacity crunch deepens, the success of LNG traders this winter will depend on securing enough vessels; To maximize profits from higher prices.
Source: XglobalMarkets
