Strong fleet growth to keep LNG shipping rates in check

2017 will be a tough year for LNG shipowners as rates are expected to remain under pressure, according to Drewry.

This year has started on a positive note for LNG shipowners as spot rates have firmed up to the West of Suez because of seasonal demand for LNG. Many analysts have started writing positive stories about the LNG shipping market believing that the momentum in rates will continue. However, Drewry reiterates its outlook that the fundamentals of LNG shipping market are not strong enough to sustain this recovery for long. Soon rates will come under pressure as seasonal demand wanes from April onwards.

Moreover this year the LNG fleet is forecast to grow at its fastest pace in five years at 13 per cent, surpassing anticipated LNG trade growth of 7.0 per cent. Therefore, Drewry believes that the worst is not yet over for LNG shipowners and spot rates will remain under pressure at an average of around US$36,000 per day (East of Suez) in 2017.

“Although the short-term outlook for this year is weak, we remain bullish about the medium and long-term outlook because of expanding worldwide LNG export capacity,” said Shresth Sharma, Drewry’s lead LNG shipping analyst. “Fleet growth will eventually start to slow from next year while tonne-mile vessel demand will improve as US LNG exports pick up pace and Australian plants start operating at full capacity. We therefore expect rates to improve from next year,” added Sharma.

Alex Baird

Alex Baird is the Managing Director of Baird Maritime