Rate rebates for LNG carriers transiting the Suez Canal have been reduced by 10% to 15% as the cost of freight fades for charterers amid the current high priced gas market.
In an advisory note circulated by Leth Agencies the Suez Canal Authority (SCA) said it was making the change "In the light of the current situation of international LNG trade and as an encouragement for LNG carriers to transit the Suez Canal", without giving further details of what it was specifically referencing.
The SCA said it is amending the 25% rebate for LNG carriers advised in February 2015 and applicable from 1 May that year to 15%.
The Authority said the new rebate would apply from 1 November.
Opportunistic move
LNG market chartering players said the rebate cut is unlikely to deter owners and charterers from using the Canal which offers a five-day sailing saving over the alternative of taking the route round the Cape of Good Hope.
They described it as an "opportunistic" move by the SCA, in what is a very strong LNG market dominated by sky-high gas prices and in which the cost of freight is currently a small and less significant part of the deal.
One called the rebate cut "greedy", suggesting that the SCA like others in the market can see the potential for delays for winter delays for vessels at the Panama Canal in the current bull market.
But he also did not think charterers would be deterred by the lower rebates, describing shipping costs as such as "irrelevance" in their calculations at present.
In the past the SCA has tried to increase its rebates to attract LNG tonnage.
In the last 15 years, the base rebate for LNG vessels has fluctuated between 25% to 35%.
LNG carriers shipping cargoes from the US Gulf are still eligible for rebates at 35%, 55% and 75% depending the destination of the shipment with what will now be a 15% rebate for LNG carriers incorporated in this.
These rebates are invalidated if a vessel calls at any ports en route before reaching the canal.
The SCA has said these destination rebates are valid through until the 31 December 2021.
