LNG, Natural Gas, Maritime & Shipping
October 21, 2024
LNG freight rates hit multiyear lows amid weak demand, ample supply
HIGHLIGHTS
Lack of arbitrage opportunities hurt rates
Participants see persistent pressure on freight rates ahead
LNG freight rates have plummeted to multiyear lows in the week ended Oct. 18, approaching operational expense thresholds and prompting a bleak outlook among market participants.
The absence of arbitrage opportunities and contango has left rates unsupported, while unusually high temperatures compared to previous years further exacerbate the situation.
High gas storage levels in Europe and Asia, and subdued cargo requirements coupled with an oversupply of ships, have contributed to the depressed rate environment. Market participants express pessimism for the next two years, indicating that rates are unlikely to recover to the highs seen in 2022 anytime soon. This year diverges significantly from historical trends, where rates typically increased during this season.
As of Oct. 18, the Atlantic Basin, saw day rates for TFDE ships dropping to $18,500/day, down from $130,000/day over the same period. In the Pacific Basin, TFDE ship prices dropped to $29,000/day from $130,000/day a year earlier. The average rates for TFDE ships for the month of October have been the lowest since 2019.
As of Oct. 18, In the Atlantic Basin, two-stroke ships stood at $28,500/day compared to $155,000/day a year earlier. Meanwhile, in the Pacific Basin, two-stroke ships decreased to $40,000/day from $170,000/day a year earlier. The rates have been the lowest since November 2022.
Recent fixtures have reported rates between $20,000/d and $30,000/d, with activity particularly subdued in the East. The Atlantic shows slightly more engagement, whereas the Pacific remains largely inactive. A market participant mentioned that the lack of cargo tenders on the FOB side indicates a challenging month ahead, with expectations for continued weakness into next year.
Excessive ship tonnage paired with delay in LNG projects is putting additional pressure on rates. One market participant remarked, “I didn’t expect such low rates – I thought we were already at the bottom – but apparently not.”