Liquefied natural gas (LNG) shipowners are facing a tough period as rates are expected to remain under pressure during 2017, according to shipping consultancy Drewry.
This year has started on a positive note for LNG shipowners as spot rates have firmed up to the West of Suez because of seasonal demand for LNG, raising hopes that the momentum in rates will continue.
However, Drewry reiterates its outlook that the fundamentals of LNG shipping market “are not strong enough to sustain this recovery for long. Soon rates will come under pressure as seasonal demand wanes from April onwards.”
Moreover, this year the LNG fleet is forecast to grow at its fastest pace in five years at 13%, surpassing anticipated LNG trade growth of 7%. Therefore, the worst is not yet over for LNG shipowners as spot rates will remain under pressure at an average of around USD 36,000 per day East of Suez in 2017.
“Although the short-term outlook for this year is weak, we remain bullish about the medium and long-term outlook because of expanding worldwide LNG export capacity,” Shresth Sharma, Drewry’s lead LNG shipping analyst, said.
Sharma added that fleet growth will eventually start to slow from next year while tonne-mile vessel demand “will improve as US LNG exports pick up pace and Australian plants start operating at full capacity. We therefore expect rates to improve from next year.”