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The freight has soared! LNG ships become a dark horse in the shipping market
This year, due to the impact of the new crown epidemic and other related factors, the shipping market can be described as ups and downs. The dry bulk shipping market has been sluggish, and it is still recovering hard; the container shipping market fell into the abyss in April and May, and recently freight rates have returned strongly. , The freight rates of various routes are in the golden age; the oil tanker market, freight rates have reached the golden peak, and of course they have fallen to the bottom of the deep valley...
On the whole, although the current shipping market is full of worries, the outlook is grim.
However, at the end of the year, a dark horse emerged.
This dark horse is the LNG carrier. In the last one or two weeks, the freight rate has jumped to the highest level in a year, and the profit is lucrative, reaching 125,000 US dollars per day.
Shipping and trade sources said that as North Asia is expected to usher in a colder winter than expected and demand for LNG cargo increases, the revenue of LNG carriers has soared to the highest level in a year.
Clarksons Platou Securities said: “In the past two weeks, the freight rate of LNG carriers has increased significantly, with some ships’ rents reaching US$125,000 per day.”
"Especially last week, chartering activities were almost crazy, and LNG carrier owners completely occupied the market advantage."
According to data from Clarksons Platou Securities, in mid-June, the rent for a three-fuel diesel-electric propulsion (TFDE) membrane LNG carrier was $30,000/day, and the rent for a MEGI (M-type electronically controlled gas injection) LNG carrier was 39,000. USD/day.
At present, the spot price of the TFDE LNG carrier is US$112,500/day, an increase of 105% from the previous month, which is 3.75 times that in June; the cost of the MEGI LNG carrier is US$125,000/day, an increase from the previous month 89%, which is 3.2 times that of June.
A ship broker said that the daily rent for a 160,000 cubic meter tanker to ship LNG in the Pacific and Atlantic basins is currently estimated to be approximately US$85,000 to US$105,000 per day.
Tim Mendelssohn (TimMendelssohn), managing director of Spark Commodities, said that on Friday alone, the daily charter fee for LNG carriers rose by US$23,750, the largest single-day increase since October last year.
"As early as the middle of the year, we cancelled 45 LNG cargoes every month. The cancellation rate dropped to zero in December and the spot price of LNG carriers soared. The short-term outlook is indeed playing a role."
At present, the revenue of LNG carriers is booming, and the industry has begun to predict and analyze. What factors have supported and boosted the surge in freight rates? How long can this golden period last?
Short-term positive factors
One is that the voyage becomes longer and the actual available LNG carriers are reduced
At present, more and more LNG is shipped from the United States to Asia, rather than from Europe to Asia, which makes the voyage of LNG carriers longer. In this case, there are fewer ships actually available in the market, and the market has demand for ships. The higher it is-this has promoted the rise of spot freight.
The second is that the Panama Canal is so congested that it takes a few days to pass
Due to the epidemic, the Panama Canal is currently experiencing serious congestion and delays. Ships carrying cargo from all over the world have to wait for several days before passing through the Panama Canal, which has further extended the voyage of the ship.
In the past few weeks, LNG transportation from the United States to Asia has been delayed, usually in less than a day, while the current unscheduled ship waiting time can be as long as 8 days. An LNG carrier named "FlexAurora" waited 9 days to pass the Panama Canal.
FGE said in a report that following the surge in coronavirus cases in the country, the Panamanian Ministry of Health has restricted the number of canal workers. There are also stricter inspections and additional procedures for transit vessels to curb the spread of disease.
Third, the climate is cold, and the demand for LNG for heating is expected to increase
According to the study of meteorologists, this year's global climate is affected by the La Nina phenomenon, and it is likely to experience the coldest winter in 60 years. The weather in Northeast Asia-Japan, South Korea and northern China will become colder than in previous years, which will greatly increase the impact on LNG. The need for heating.
According to Refinitiv Eikon’s ship tracking data, mainly driven by the surge in demand in South Korea, the monthly LNG transport volume in North Asia will hit the highest level since January.
In terms of China's LNG demand, since September, LNG has entered the traditional peak season, and prices have continued to rise driven by demand factors such as industrial and residential heating. The average price of LNG on November 2 was 3790 yuan/ton, which was more than 40% higher than in early October. And for now, this demand will be further enhanced.
Long-term downside factors
However, due to the high backlog of newbuildings, it will bring long-term downward pressure on the LNG transportation market in the future.
Another problem is that the backlog of new LNG carriers is very high. Market research institutions warn, “The current order of LNG carriers is equivalent to 23% of the existing fleet, and new ships will be delivered in 2021. The total delivery volume is equivalent to a 9% increase in the fleet, putting downward pressure on the market."
The newbuilding orders for crude oil and product tankers, as well as bulk carriers and container ships, are all at historically low levels.
Benefits and downward pressure are intertwined, and the LNG transportation market is facing great uncertainty, but at least now this dark horse is running at a speed of 125,000 US dollars per day, ship owners must seize this wave of golden opportunities to sprint annual performance.
So, how long can this dark horse ride on the shipping market? We will wait and see!
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