LNG shipping rates reach new high

LNG shipping rates are soaring high, not just for LNG shipping but for any commercial shipping sector ever. And these rates are expected to keep climbing. 

As predicted by Pareto analyst Eirik Haavaldsen the liquefied natural gas shipping rates could top $1 million per day in the fourth quarter. 

Clarksons Securities put average voyage rates for the most efficient LNG carriers — those with two-stroke propulsion known as MEGI or XDF carriers — at $313,000 per day as of Monday.  And, price for Benchmark tri-fuel, diesel engine (TFDE) carrier are assessed at $276,700 per day.

Spot earning are currently at dizzying high. As per brokers, owners can now achieve three-way economics. They can now be compensated for not only regular round voyage but also for positioning voyages. As a result, earnings on a round-trip basis are expected to be around $500,000 a day.

The Reason

Shooting to the stars, the LNG rates are as high as $300,000 per day, making the current market situation unprecedented. With Russia-the gas supplier at war, the supplies to German have been shut off, and the two pipelines in the Baltic sabotaged. Further, the number of LNG ships available for spot deals is exceptionally limited. This has made the spot market extremely thin. 

Almost all of the world’s LNG fleet is locked up on long-term charters. In the past, more of those vessels may have been “relet” into the spot market to take advantage of skyrocketing rates. This time around, the profits from buying and selling the cargo itself are more attractive.

According to Clarksons Securities analyst Frode Mørkedal, “Brokers note that charterers and holding onto tonnage instead of subletting due to the exceptionally high cargo profits, which makes the optionality of having a vessel ready more lucrative than subletting the vessel in the spot market.”

Meanwhile, more ship capacity is getting tied up with floating storage. “From the beginning of October until the end of November, LNG cargo markets have a strong contango structure of $10 per million Btu,” Morkedal explained. “This is increasing interest in floating storage. A large number of laden LNG carriers are now reportedly waiting offshore of southern Europe as a result.”

The multiple bulk commodity shipping markets through the years have observed an extraordinarily high day rate.

  In 2019 and the spring of 2020, the rates for very large crude carriers reached $200,000 per day. Rates for Capesize bulkers reportedly surpassed $200,000 per day in June 2008.

Last year, the container shipping, and spot freight rates topped $30,000 per forty-foot equivalent unit-around 30 X as high as rates during some years pre-COVID. 

Many containerized cargo shippers accused the rates to be “unfair” and represented “price gouging.” While on the other hand, when bulk commodity shipping witnessed rate spikes due to supply-demand imbalance, shippers simply refuse to book the trip than pushback. 

Source: Freightwaves

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