Drewry: LNG Market Will Need More Vessels

Despite the current weakness in liquefied natural gas (LNG) shipping rates, the market will require more LNG vessels than listed on the current orderbook, shipping consultancy Drewry said, adding that it maintains its bullish long-term outlook for LNG shipping.

Spot rates for dual fuel diesel electric LNG vessels have been hovering around USD 30,000 per day since the second quarter of last year, representing a decline of 80% compared to the last market peak in 2012, mainly attributed to a strong fleet growth coupled with weak cargo demand.

“The impact of weak rates is clearly visible on falling newbuilding activity as only four LNG vessels had been ordered in the first six months of the year,” compared to an average of 44 vessels ordered per annum over the prior five-year period, Drewry said.

Continuingly weak ordering is expected to slow fleet growth from 2019, when almost all of the currently under-construction LNG plants are expected to come online.

Drewry believes that the long-term outlook for LNG shipping “is still strong and the limited new ordering is not based on market fundamentals.”

“The reason for our optimism is that almost 125 million tonnes of capacity is currently being built and there are plans for more. As a majority of the supply from plants under-construction has been contracted on long term agreements, it is likely that LNG will be traded so requiring more vessels,” Shresth Sharma, Drewry’s lead LNG shipping analyst, said.

“Despite a widened Panama Canal, new LNG export capacity due to come online by 2020 will require shipowners to order an additional 65 vessels over this period to meet shipping demand,” Sharma added.

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