LNG shipping industry

The LNG shipping industry has changed considerably in the last 25 years. The vessels have evolved from the Moss-steam models back in the ’90s to the new MEGI’s/XDF.

Nowadays, there are 4 different types of LNG vessels on the seas:

  • Steam Moss 
  • Steam Membrane
  • TFDE
  • MEGI/XDF
Current LNG fleet

Steam vessels are being transformed to FRSU, FLNGs or cold stacked as it is difficult for them to compete against the newer vessels. A key distinction is that while TFDE carriers typically achieve an average speed of 19 knots, ST carriers are limited to 14 knots to avoid needing forced boil-off and higher LNG consumption. Because of that and the higher boil off, the rate that it is paid for them is $10-15k lower than to TFDE.

The LNG carrier charter cycle comprises: 

  • loading the vessel at the export port with LNG equivalent to 98 % of the nominal volume of the vessel, in this case, 160,000 m3 of liquid LNG, assumed to take 1 day; 
  • voyage time which incurs the charter cost day rate. Voyage time is the distance between ports via a defined shipping route, assuming both outward and return journeys, during which fuel will be consumed to power the ship’s engines: 
What is the TCE?

TCE means Time Charter Equivalent. In the shipping industry, TCE is a measure to calculate the daily revenue performance per vessel.

TCE = voyage revenues – voyage expenses

Current LNG rates:
Table

Description automatically generated
What is the current situation in the LNG shipping industry?

TCE rates rely on seasonality (higher in winter) and supply of vessels compared to the demand for them. Currently, it is expected a higher number of vessel delivered in 2021-2022 than new liquefaction capacity built, so TCE rates are expected to be low for the next two years.

In the wake of Covid-19, demand is expected to fall meaningfully short of supply. This could be offset limitedly by the lay-up of older ships and vessels being used for floating storage. Nevertheless, these factors have been insufficient to drive higher rates. Although at least unless the Asian markets open near the end of the year. For 2021, it is expected much of the pent-up demand and compressed U.S. output to return to the market driving a sharp increase in cargoes. However, 2021 is also a heavy year for new vessel deliveries, and the fleet is already operating well below full utilization. Similarly, in 2022 there is very little new liquefaction scheduled to come online. However, LNG pricing should be substantially better in 2022. It will create longer ton-mile demand and trading opportunities which should help absorb latent capacity. 

La niña effect on LNG shipping

This winter “La niña” phenomenon is affecting the weather in Asia, making it colder. It has a huge effect on the LNG market. Natural gas is used to power heat systems and Asia is the main destination of LNG ships. Consequently, the demand is increasing and the rates are rising as shown in the third picture.

Sign up to receive an email with our latest publications