LNG Shipping Rates Fall As Vessel Availability Increases
The cost of shipping liquefied natural gas (LNG) cargoes has fallen to its lowest level in five years as the number of new cargo ships worldwide exceeds shipping demand and ship availability increases due to shorter average sailing times.
On Tuesday, transatlantic freight rates were $4,250 per day for a two-stroke ship that can carry 174,000 cubic meters of LNG, the most common type of LNG on the market, according to pricing agency Spark Commodities. On Friday, the price fell to $3,500, the lowest level in Spark’s data in five years.
Prices on the Atlantic route have fallen 82% since the beginning of the year and more than 90% since the same period last year.
Rates for the same class of ships on the Pacific route have fallen by nearly half so far this year, falling to $11,000 per day on Tuesday, Spark data showed. That’s the lowest level in its data set and down about 80% from last year.
“The global LNG fleet size is expected to grow further in 2024, but global LNG shipments have increased only slightly, leading to an oversupply of ships as the market expects LNG export capacity to increase significantly over the next 18 months,” said Xiaowei Ding, vice president of global LNG shipping pricing at Argus.
Charterers and shipowners with spare capacity are competing to charter available ships, Mr Ding added.
“Companies with spare capacity are willing to significantly reduce their bids rather than idle ships to help them recover some of their operating costs and reduce losses.”
For older but popular tri-fuel diesel-engine vessels carrying 160,000 cubic meters of LNG, Atlantic prices have been negative over the past week, hitting an all-time low of minus $2,750 a day on Monday before paring losses to minus $1,000 a day on Tuesday, said Qasim Afghan, an analyst at Spark Commodities.
Afgan said the only time rates were negative was in February 2022, just before Russia invaded Ukraine, but that lasted only two days.
“Negative round-trip rates indicate that shipowners’ profits are not enough to fully cover the fuel costs involved in returning their ships to loading ports for round-trip voyages across the Atlantic basin,” he said.
Market sources had previously expected the slide in LNG shipping rates to continue until 2025, when the addition of new tankers will outpace the growth in LNG production.
High shipping prices in Europe also encourage U.S. cargoes to remain in the Atlantic rather than head to Asia, increasing vessel availability as it shortens average sailing times. In January, at least six LNG cargoes were transshipped from Asia to Europe.
China’s tariffs on U.S. LNG and a record number of new ships entering the market this year will exacerbate the impact, Spark’s Afgan said, adding that freight rates are likely to remain at current levels for the rest of the month.
“The U.S.-Asia arbitrage is currently expected to remain closed through the remainder of 2025…A significant change in the JKM-TTF spread is required for this market signal to reach Asia,” he said, referring to the spread between benchmark Japanese and Korean LNG prices and European gas prices on the Dutch TTF axis.
On Tuesday, the TTF price for gas was $15.76 per million British thermal units (MMBtu), while the JKM price was $14.41 per million British thermal units (MMBtu).
