Rush Ahead! The LNG Ship Market "Explodes" And It’s Hard To Get One.

The daily rent of one-year lease of LNG ships has reached US $120000, which is close to the peak in the past 10 years. The order of new large LNG ships has reached 61, with a year-on-year increase of more than 4 times. The delivery period has been scheduled after 2026.

The Russian Ukrainian crisis and the sanctions imposed by western countries on Russia have reshaped the global energy pattern. The demand for LNG has surged, "one ship is hard to find", the daily rent of LNG ships has skyrocketed, the order volume and price of new LNG ships have increased, and more and more shipyards have begun to enter the LNG ship market. It can be said that the LNG ship market is facing the best opportunity in history.

Rush Ahead! starts in advance! LNG carrier daily rates soar to near 10-year high

Poten & partners, a shipping brokerage company, recently said that the spot freight rate of 160000 cubic meters of LNG ships on the Atlantic route has reached US $100000 / day, and that in Asia or the east of Suez is US $85000 / day, which is significantly higher than the average price this year. As a comparison, the average annual price in Asia is US $49000 / day.

Poten & Partners pointed out that the spot freight rate of LNG ships has been very strong since May after hitting the bottom in March. The surge in LNG demand and buyers' avoidance of Russian goods and ships due to the conflict between Russia and Ukraine have led to the emergence of more long-term charter parties, which has restricted the supply of ships in the spot market.

In addition, the number of long-term charters has also increased significantly recently, and ship owners are withdrawing their capacity from the spot market. Poten & Partners said that it has seen some 10-year charters that have not been seen in many years. In the past two winters, buyers who have been in trouble due to transportation shortage have turned to long-term chartering. Therefore, the number of LNG ships whose charters will end in the next few months will be less, which will exacerbate the shortage of supply.

At the same time, LNG time rent is also rising sharply. Sources said that at present, several energy companies including shell, totalenergies and SINOPEC are carrying out an annual rush to seize ships in advance to ensure that there is enough transport capacity to transport LNG in the peak demand season in winter. Generally speaking, the rush for LNG ships usually occurs in the late summer in the northern hemisphere, but this year has begun before the summer.

According to the data of Clarksons platou securities, the daily rent of one-year term lease of LNG ship has reached US $120000, an increase of more than 50% year-on-year, approaching the high level of US $140000 / day in 2012. Industry executives said that energy companies are seeking to reduce daily rents by discussing extending the lease term.

Oystein kalleklev, head of flex LNG and avance gas, the LNG carrier operator, said: "the market has exploded! It is difficult to find any ship available for long-term charter in the market."

Insiders said that after the outbreak of the conflict between Russia and Ukraine, Europe imposed energy sanctions on Russia and shifted to importing LNG from the United States to make up for the energy gap, which is one of the main reasons for the recent sharp increase in the price of international LNG ships. The EU has promised to reduce its dependence on two-thirds of Russian natural gas by the end of this year, and will import an additional 50billion cubic tons of LNG, igniting a boom in the LNG market.

According to the US Energy Information Administration (EIA), in the first four months of this year, nearly three-quarters of the US LNG was shipped to Europe, and the export volume to Europe and Japan was more than three times the average level of last year.

Meanwhile, poten & Partners mentioned that the U.S. Freeport LNG export terminal was temporarily shut down due to the fire, but this did not affect the rise of the spot freight rate of LNG ships. Poten & Partners estimated that the Freeport LNG Export Terminal would be closed by the end of the month, and the supply interruption should have a certain impact on the market. The loss of supply anywhere means the loss of demand, but it has not been seen yet.

The order price of LNG ships has hit a new high, and the tight shipbuilding capacity has attracted more shipyards to join.

Since the new coronavirus, the order volume of new LNG ships has continuously set a new historical record. However, due to the continuous growth of freight demand and the accelerated elimination of old ships by environmental protection regulations, the situation of insufficient transport capacity in the LNG ship market may continue for a long time.

After the record surge of orders in 2021, the LNG ship construction market has remained hot this year. According to Clarkson's data, as of the end of May this year, the global new ship orders of 174000 cubic meters and above large LNG ships increased by more than four times compared with 14 in the same period last year, reaching 61, while the annual order volume of large LNG ships last year was 75.

In addition to the increase in orders, the LNG ship price also hit a record high. According to Clarkson's data, since the beginning of this year, the cost of 174000 cubic meters of large LNG ships has been increasing, and now it has increased to 229million US dollars, continuously breaking the historical record. However, Daewoo shipbuilding and Hyundai Heavy Industry Group of South Korea have recently undertaken LNG ship orders from overseas Shipowners, and the single ship cost has been close to 240million US dollars.

Although Korean ship enterprises still take the lead in the large LNG ship market, Chinese ship enterprises are speeding up to catch up. Of the 61 orders for large LNG ships in the first five months of this year, 39 were undertaken by the three major shipping companies in South Korea, and the other 22 were received by Chinese shipping companies, which has exceeded the 14 orders received by Chinese LNG ships last year.

Analysts believe that due to the changes in the international energy structure and the requirements of the new maritime environmental protection regulations, the demand for LNG ships will continue in the short term. However, the limited shipbuilding capacity is restricting the expansion of LNG ship fleet. For a long time, only the three largest shipping companies in South Korea and the four shipyards in Hudong Zhonghua have the ability to build 170000 m3 super large LNG ships. According to the data over the years, the annual output of LNG ships does not exceed 50.

After the orders of container ships set a historical record last year due to the epidemic, the orders held by container ships accounted for most of the shipbuilding capacity of Chinese and Korean shipyards, and there was hardly enough capacity space to meet the demand for LNG ships. Under the current situation, more LNG ship orders are queuing up, and the delivery time provided by the shipyard is extended to 2026 and beyond.

Executives of Hyundai Heavy Industry Group, the world's largest LNG ship builder, said that the delivery space of China and South Korea shipyards has been occupied by a large number of new ship orders. At present, Hyundai Heavy Industry Group's production capacity is close to saturation until 2025. According to the senior executive, Hyundai Heavy Industry Group can build 20 to 22 LNG ships every year, and container ships and LNG ships account for about 30% of its existing delivery space arrangement

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In addition, due to the shortage of labor, the Korean shipyards are also struggling to operate, and have to deal with the problem that the price of key raw material steel plate has almost doubled.

In this context, more and more shipyards are actively seeking to enter the field of LNG ship construction. Earlier this year, Jiangnan Shipbuilding Group and Dashu group successively received orders for large LNG ships, forming a new situation of "three pillars" among Hudong Zhonghua, Jiangnan Shipbuilding Group and Dashu group, and changing the disadvantage of a single Hudong Zhonghua enterprise participating in international competition in the past. In addition, it was recently reported that Nantong COSCO Shipping Kawasaki and Yangtze River shipping are also seeking to enter the large LNG ship construction market.

Not only China and South Korea, Mitsubishi Heavy Industries of Japan has planned to re launch the large-scale LNG ship business, mainly focusing on the thin-film LNG ships built by Chinese and South Korean ship enterprises, assisting in providing design drawings and purchasing some equipment, and carrying out construction work in other shipyards in Japan. Previously, as the Korean ship enterprises basically monopolized the LNG ship market with price advantages, Mitsubishi Heavy Industries has not been able to obtain any LNG ship orders since 2015, and the last LNG ship was delivered in September 2019.

However, industry experts believe that the LNG ship is an internationally recognized "three high" ship type with high technology, high difficulty and high added value. For new shipyards entering this field, it will take several years to have the professional technology and ability to build and produce LNG ships on a large scale.