The LNG shipping market is poised for further growth in the coming months as the global economy heads towards a faster recovery rate and the shift to cleaner energy sources accelerates in more countries. In its latest market outlook, shipowner GasLog said that “LNG demand was 95 mt in the second quarter of 2021, according to Poten, compared with 86 mt in the second quarter of 2020, an increase of about 11%. Demand growth was particularly strong in Asia and South America.
Specifically, demand increased, year-on-year, in China (+4 mt, or up 25%), Japan (+1 mt, or up 7%) and South Korea (+1 mt, or up 9%), the three largest LNG end markets, as these countries rebuilt inventories following a colder-than-average winter ahead of summer cooling demand. In addition, demand from Argentina, Brazil and Chile grew by a combined 3 mt (or 116%) from the previous year, due to lower hydroelectric production in the region. Growth in these regions was offset by a decline of approximately 2 mt (or 35%) in the Middle East.”
According to the shipowner, “Global LNG supply was approximately 96 mt in the second quarter of 2021, up 8 mt (or 9%) year-on-year, according to Poten. Supply growth in the second quarter was particularly strong in the United States (“U.S.”), which increased production by 7 mt (or 61%) compared to a year earlier, due to higher utilization of existing liquefaction trains, as well as ramp-up of production at the third trains of Freeport LNG, Cameron LNG and Corpus Christi LNG.
The resumption of LNG exports from Egypt contributed to increased supply from the Middle East by approximately 2 tons (or 32%), while higher utilization of existing facilities caused LNG production in Russia to increase by approximately 1 ton (or 17%). Growth in these three regions offset declines in Trinidad and Norway. Looking ahead, approximately 125 million tons of new LNG capacity is currently under construction and is scheduled to come online between 2021 and 2026.”
“Headline spot rates for TFDE LNG carriers, as reported by Clarksons, averaged $58,000 per day in the second quarter of 2021, a 61% increase over the average of $36,000 per day in the second quarter of 2020. The leading spot rates for steamships averaged $45,000 per day in the second quarter of 2021, up 96% over the average of $23,000 per day in the second quarter of 2020. The headline spot rates in the second quarter benefited from growth in Asian LNG demand, combined with growth in U.S. LNG supply, as detailed above,” GasLog added.
According to GasLog, “as of July 23, 2021, Clarksons assessed the prime spot rates for TFDE and Steam LNG carriers at $56,000 per day and $39,000 per day, respectively. Forward-looking assessments for spot rates for LNG carriers indicate an increase in spot rates for the remainder of the year.
However, the magnitude and pace of any sustained upward movement in spot freight rates will depend on both the continued recovery in LNG demand and LNG price differentials between major exporting and importing regions, while the expected growth in the global LNG carrier fleet, combined with any slowdown in demand, could create volatility in the spot and short-term markets in the near to medium term. As of July 23, 2021, Poten estimated that the order book amounted to 126 dedicated LNG carriers (>100,000 cbm), representing 19% of the fleet on the water. Of these, 106 vessels (84%) have multi-year charter contracts. As of July 23, 2021, 31 orders had been placed for newbuild LNG carriers, compared with 34 for the full year 2020,” according to the shipowner’s analysis.
