The disconnect between the value of LNG cargoes and spot rates for the ships that carry them has resulted in a spot market that does not function at times, says Flex LNG chief executive Oystein Kalleklev.
At the TradeWinds Shipowners Forum Oslo during Nor-Shipping, he pointed to a spot market that has been extremely volatile since Russia invaded Ukraine in February 2022, according to a recently released recording of the event.
Rates rose from negative earnings in the first quarter of last year, as operators were willing to take cargoes at a loss just to keep their ships cold and reposition, to fixtures in the region of $600,000 per day late in 2022, although spot earnings have since come down from such astronomical heights.
“That is also a reflection that the spot market has started not to function,” Kalleklev said.
“Because the economics you can make on cargoes are so tremendous, you could charter in a ship, you can idle it for 10 months, and you pick up one cargo in the US and you sell it, and that pays the freight rate for that ship for more than a year.”
He said the situation has led traders to scoop up tonnage: “The spot market has really become a relet market.”
Click here to watch the full recording of the TradeWinds Shipowners Forum Oslo.
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