DW: new developments to shake up LNG market
Recent development in the LNG market is expected to have a significant impact on both the construction of LNG carriers and the primary LNG trading routes, according to Douglas-Westwood (DW).
The LNG carrier market currently faces over-supply and a combination of low commodity prices and a reduction in imports from key consumers such as Japan (following the re-start of its nuclear power stations), has resulted in a substantial decline in charter rates for LNG carriers.
Rates have been pushed down to approximately US$25,000 a day, considerably below typical breakeven costs of $40,000, as DW notes that 36 carriers were delivered in 2015, and only four newbuilds having been ordered in 2016 so far.
However, this trend is expected to change over the 2017-2021 period, due predominantly to liquefaction projects expected onstream in Australasia and North America. The USA is forecast to increase its LNG export capacity from 11 mmtpa in 2016 to 77 mmtpa by 2021. In the World LNG Market Forecast Report 2017-2021, DW forecasts the delivery of over 150 units yet to be ordered over the 2017-2021 period, in addition to the current order book, in order to satisfy this additional supply.
DW forecasts the delivery of over 150 units yet to be ordered over the 2017-2021 period, in addition to the current order book, in order to satisfy this additional supply.
With the increase in U.S. LNG exports, DW expects the diversification of the primary trade routes for LNG transportation. The recent expansion of the Panama Canal also provides a means for vessels travelling to Asia and South America from the Gulf Coast to reduce their voyage times. This is ultimately expected to introduce greater competition to LNG trading routes, DW says.