LNG spot rates nosedive below breakeven

The LNG shipping markets have gone eerily quiet with many ships operating at below breakeven levels on the spot trades with time charter prices also seriously eroding.

Describing the sector as “under significant pressure”, analysts at Jefferies note two-stroke LNG carrier spot rates are assessed at $31,000 a day, while TFDE LNG carrier rates are assessed at $18,000 a day.

“A moderation in LNG prices from the high levels seen during the 2021-2022 period, along with tight regional price differentials, have kept spot cargo volumes limited,” stated a new report from the American investment bank.

In addition, Jefferies noted the heavy newbuilding deliveries this year are outpacing project start-ups, leading to oversupply of vessel availability.

The latest data from Clarksons Research (see chart below) shows the immense LNG orderbook now stands more than 50% of the extant fleet, by far the highest orderbook-to-fleet ratio of all shipping segments.

Jefferies estimates LNG shipping capacity utilisation at 84% for 2024, boosted by 4% due to Red Sea diversions, which compares to 86% in 2023, and is projected to ease further in 2025 to 81%.

“Given this, charterers have generally taken a step back from the term markets with little activity reported recently for medium- to long-term charters,” Jefferies noted.

According to Clarksons, the three-year term rate for a two-stroke LNG carrier stands at $70,000 a day, which is mostly an assessment, as compared to last year’s $140,000 a day figure which had been based on several fixtures.

Affinity, another London broker, has rates for six-month rmodern two-stroke LNG tonnage pegged at a $36,700 per day while one-year rates are around $50,000 per day, down over $10,000 per day and $6,000 respectively in the space of just one week.

“The market remains oversupplied in both basins and, with the East/West arbitrage firmly closed, there is limited opportunity to alleviate the current pressure,” Clarksons Research noted in a recent report.

With spot charter rates heading below breakeven levels the situation has been described by the creators of the UP World LNG Shipping Index as being particularly harsh for operators without long-term contracts, pushing some towards potential asset sales.