US Gulf Coast LNG freight rates sink to multi-month lows

LNG freight rates out of the US Gulf Coast have fallen to their lowest levels since August as a lack of demand as well as an increasing number of vessels in the spot market cushion prices.

Platts, part of S&P Global Commodity Insights, assessed the USGC LNG freight rate to Northwest Europe and Japan/Korea at $1.27/MMBtu and $2.77/MMBtu, respectively, on Dec. 20. This freight rate to Northwest Europe fell 9 cents/MMbtu on the day to put it at the lowest since Aug. 31, while the rate to Japan/Korea fell by 18 cents/MMBtu to put levels at their lowest since Aug. 15.

The market points to the current lack of arbitrage opportunities as well as stagnant demand weighing on freight rates. Additionally, due to the limited opportunities and a lack of demand catalysts in the market, the number of available spot vessels across the Atlantic has steadily improved on the month.

Sources suggest the spot market this month has remained relatively depressed compared with previous years.

Despite delays at the Panama Canal, high inventories coupled with milder weather have depressed demand. Additionally, constraints at the Suez Canal due to attacks in the Red Sea have caused companies to redirect their vessels away from the Suez towards the Cape of Good Hope.

However, the USGC freight rate to Japan/Korea via the Cape of Good Hope was assessed at $4.10/MMbtu on Dec. 20, down 29 cents/MMBtu on the day and the lowest since Aug. 15.

While taking the longer voyages by sailing via the Cape of Good Hope may create additional demand for shipping, spot demand remains relatively weak as the market hangs in limbo ahead of the holiday season.

"LNG tankers are already reported to be rerouting to take the Cape route from Qatar to Europe," Jack Kennedy, associate director, and Chris Rogers, head of supply chain research, at S&P Global said. "While that is slower and will reduce effective capacity, Europe's reserves are at record highs for the time of year."