Spot charter rates for modern two-stroke LNG carriers have plummeted to below $30,000 per day at what is normally one of the strongest demand periods for vessels.
LNG shipbrokers said two-stroke vessel has been seen fixed at a rate in the mid-$20,000 per day in the Atlantic basin for a mid-November loading. This represents a $15,000 per day rate drop week on week.
One broker described steam turbine vessels as “out of the picture” with rates for tri-fuel diesel-electric LNG carriers now at operating expense levels of about $13,000 to $14,000 per day.
While the LNG market is holding up slightly better in the Pacific region, the broker said “the Atlantic [market] is falling off a cliff” and described it as “decimated”.
In contrast, a year ago average spot charter rates for LNG two-stroke vessels were at, or over, the $200,000 per day mark.
The rate drop shocker comes in a week which has seen some activity with four to five fixtures concluded.
Market players said there is simply too much tonnage and not enough cargo.
They highlighted that the bulk of the tonnage is sitting in the hands of the portfolio players.
In addition, one player flagged up what he described as a “weird dynamic” not normally seen in the winter market where traders and majors would usually tend to hang onto their tonnage rather than relet it.
Instead, he said traders are making increasingly aggressive free-on-board bids on cargoes and sinking the shipping costs, which is dragging down the freight.
Fearnley LNG said in its weekly report that a soft LNG market is seeing “tendered cargoes hoovered up by those with length in their portfolios, resulting in few firm requirements”.
The broker added: “The opportunities that do emerge are fought over keenly, and this trend doesn’t look like easing in the near future: rumours of sub-fixtures below all-time lows for two-strokes circulate at the time of writing.”
On top of this, particularly mild temperatures in both the East and West are crushing demand and ruling out any arbitrage between basins.
Brokers said there is nothing independent owners with LNG tonnage can do and suggest they would be best leaving their vessels idle in the current rate environment.
