Demand growth and the number of LNG carriers due for delivery next year are the main concerns for the LNG carrier market, shipbroker Fearnleys said.

Delivering a quarterly review on YouTube for the first time n a crisp five-minute clip, Fearnleys senior analyst Gonzalo de Arteaga said there are currently 124 LNG carriers on order.

Of those, 16 are due to be delivered this year, with almost 50 to follow in 2021.

“This has become the main concern for the market along with LNG demand growth,” he said.

Despite Covid-19, the LNG market is expected to grow this year, De Arteaga said, with some volume growth recovery likely in the current quarter.

He said the US remains the main source of additional LNG in the market and this is expected to continue.

Europe continues to be the region for import growth, despite a third quarter slowdown. Asia is showing some soft growth but is hiding big swings, with a drop in Japan's imports cancelling out some of the increase in volumes seen for China.

Fast moving

De Arteaga said the market is “developing quite fast” as he gave his presentation on Thursday.

He said prompt vessel availability is below five and spot charter rates are accelerating past the six-figure mark.

“Charter rates are shooting up which triggers the usual wait-and-see approach from potential sublets reinforcing low prompt availability and stronger charter rates.”

“A cold winter could have consequences for the market next year,” he said.

Reviewing the last three months, De Arteaga said spot charter rates are up 30% compared to second quarter but remain 30% lower than they were the same time last year.

De Arteaga said that while the LNG fleet grew 5% during the third quarter, the tonne-mile balance was down 2% year-on-year, which he said was the first annual drop for a quarter in years.

Deliveries impact

Effectively this means that the fleet utilisation went down, he said. And while the tonne-mile balance showed some recovery in the second quarter, it was not enough to keep up with newbuilding deliveries.

Instead the recent recovery in charter rates can be explained by the rise in spot gas prices, he said, which have been climbing since the record lows seen in the second quarter.

De Arteaga said 22 LNG carrier orders were logged during the last quarter taking the total for this year to 2025.

He said all of these are linked to long-term contracts which should be the case for new orders in the near future.

LNG asset values have continued to fall, the analyst said.

Fearnleys is pegging the cost of a 174,000-cbm ME-GI or X-DF LNG newbuilding at $180m, down almost $9m down on prices at the start of this year.

De Arteaga said secondhand values are coming under even more downward pressure as more vessels come up for sale in a very illiquid market.

He said Fearnleys referenced values for steam turbine and tri-fuel diesel-electric vessels are down around $30m so far this year.