Fewer on-order LNG carriers are showing as open for business as vessels are secured by charterers on term business prior to delivery.

Shipbroker Fearnleys detailed there are now just over 20 newbuildings available that have yet to be fixed on charters for periods of up to one year.

Of those, the broker is showing 13 open vessels scheduled for delivery in 2021, a drop from the 17 logged earlier this year by Fearnleys and other brokers.

A further 11 vessels without term business are listed for handover in 2022, with one to follow in 2023.

In mid-2020, TradeWinds reported that about one-third of the 132 vessels on order, some 45 ships, appeared to have no firm charter commitments.

Getting creative

Fearnleys senior analyst Gonzalo de Arteaga said some of the speculatively-ordered vessels delivering now might not be getting the rates that newbuildings contracted against seven-year-plus charters achieved. But he said there is some creativity going on with periods and options.

He cautioned that it does not mean that these vessels will not re-emerge as sublets in the market later.

Winter risk is back on everyone’s mind

Gonzalo de Artega

De Arteaga said the decrease in open newbuilding tonnage is a consequence of the strong winter seen for LNG carriers, where fleet utilisation shot up to 100%.

He said that before winter market players were “a little bit spooked” about 2021 but after strong action in December and January sentiment had lifted.

“Winter risk is back on everyone’s mind, something we haven’t had in the previous two winters,” he said.

De Arteaga said supply disruption in Asia from producers such as Shell’s Prelude FLNG unit and the Gorgon LNG project in Australia, the cold weather and higher gas prices pulled US cargoes to Asia over winter.

2022 trade shift

As some Asian supply comes back online, Europe restocks and the market rebalances this might slow some of the growth in sailing distance for vessels in 2021.

But from 2022 onwards, despite the slim volumes of new liquefaction due online, Fearnleys sees US trade slowly shifting back towards Asia and the broker remains optimistic for the LNG shipping market in the period through into 2024.

De Arteaga said bottlenecks in the Panama Canal are likely to remain a problem in periods of peak demand.

He said that while the authority is doing its best to accommodate vessels with a record number of transits logged this winter, these still proved insufficient to meet demand with waiting times increasing and more ships opting to take a longer route from the US to Asia via the Cape of Good Hope.

The analyst added that the LNG market is also "not done with floating storage".

This started to rise in 2018 and was a factor during the past two years. "It will continue to be historically relatively high in 2021," he added.

Fearnleys believes there will be fresh LNG carrier orders in the next 18 to 24 months on the back of projects with uncovered requirements and for fleet renewals.

De Arteaga has noticed a tendency for orders to skip the 2023 delivery window for 2024, indicating that slots for the earlier year could prove a headache for yards.

The brokerage sees LNG carrier demolition rising through this decade.