In Hellenic Shipping News 02/12/2016
A total of around 300 spot fixtures are expected to be concluded in 2016, a significant step up from around 190 voyages in 2015, said ship owner Golar LNG this week. According to the ship owner “new LNG supply trains are delivering on an almost quarterly basis, gradually eroding the overcapacity in the shipping market. There are clear signs of tightening in the spot market and this improvement is encouraging charterer interest in longer term contracts. Based on fixture activity thus far, 4Q shipping results are expected to be approximately in line with 3Q. The current market strengthening is already pushing 1Q 2017 utilisation toward 3Q 2016 levels. Shareholders can therefore expect a positive improvement in1Q revenues”, Golar LNG noted.
According to the ship owner, “the third quarter began in much the same way as the first half of the year with excess tonnage weighing heavily on rates. This was followed by increased activity in August that resulted in a step up in rates and utilisation, particularly for owners with open tonnage in the Atlantic basin where spot rates in excess of $40k/day were achieved. Both chartering activity and rates have since eased but levels remain well above the lows reached in the first half of 2016. The Pacific market continued to be typified by higher liquidity with an abundance of available shipping as well as spot demand from projects, utilities and traders. Spot charters have typically been for short durations, maintaining liquidity but limiting significant rate increases. Atlantic activity on the other hand has been more sporadic with thin tonnage availability and limited demand occasionally interrupted by sudden waves of requirements that clear out this available tonnage and result in improved rates”, Golar LNG noted.
In terms of LNG supply and infrastructure, the owner said that “new production continues to deliver with T9 of Malaysia LNG, Petronas FLNG1 and train 2 operations of Gorgon and Sabine Pass set to start during 4Q. Looking to 2017, significant additional production is expected from Gorgon and Sabine Pass together with new production from Whetstone. The FLNG Hilli is also set to start producing. All in, approximately 135 million tonnes of new production equivalent to 52% of current LNG production is expected to deliver between now and 1Q 2021. During recent months a number of market participants have chosen to take shipping coverage for 2017. Up to 16 vessels in the global spot fleet have been fixed for periods of 6-18 months starting between September and February. Golar believes that this tightens the outlook for structural availability into 2017. As new LNG arrives and prompt availability of shipping tonnage declines, charterer interest in period contracts is expected to grow bringing the shipping business ever closer to its inflection point”.
“Discipline among ship owners continues to be maintained with only 6 LNG carriers (approximately 1% of the global fleet) ordered this year to date”, concluded Golar LNG.
Meanwhile, as was pointed out recently by global shipping consultancy Drewry, “ if Asian buyers continue to divert their contracted supply from the US towards Europe and Latin America, it will reduce demand for LNG vessels in the long term by cutting down on long-haul trade”. Drewry has been maintaining a bullish long-term outlook for LNG shipping for quite some time and expects rates to improve substantially from 2018 onwards. One of the major reasons for this outlook is the expansion in US LNG supply. Since most new LNG export capacity in the US will start to come online from 2018 onwards and almost 85-90% of this supply has been tied to contracts, the trade will create demand for a large number of vessels. However, the LNG market has changed considerably from the time when these contracts were signed and so Asian buyers are looking to offload their contractual supply. If we continue to see more Asian LNG buyers looking to divert their US cargoes either to Europe or Latin America, this could substantially reduce the demand for LNG ships, taking into account the shorter hauls from the US to Europe or to Latin America. “Although the capacity diverted so far by Asian buyers is not significant enough to negatively impact LNG shipping, if this trend continues and more Asian buyers follow suit, it will reduce demand for LNG vessels”, said Shresth Sharma, Drewry’s lead LNG shipping analyst.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
