Drewry warning over shaky LNG sector

The LNG Shipping Market Annual Review also warned that the sector could face vessel shortages as orders slow and liquefaction projects come on stream.

A deadly combination of expanding vessel fleet, limited cargo availability and falling trade caused short-term freight rates for conventional LNG carriers to decline through 2013 and the first half of 2014.

Overall, global LNG trade fell for the second consecutive year in 2013 by 1% as many liquefaction sites faced shutdown resulting in tight supplies and higher prices.

Drewry’s lead gas shipping analyst Shantanu Bhushan, said: “Although there are plans to add 64 billion cubic metres per annum of liquefaction capacity during 2014-15, major concerns for shipowners are the timely completion of these projects, the possible restart of Japanese nuclear power plants and the fast rising vessel fleet. As a result, the outlook for unchartered vessels over the next 18 months is not favourable and we expect spot and short-term freight rates to remain under pressure.”

However, he pointed out that demand is expected to recover strongly in the latter part of the decade as new production comes on stream, on completion of various projects under construction in Australia and North America.

In addition, Drewry is forecasting that fleet growth will accelerate at an annual rate of 8% in 2014 and next year to reach 66 million cubic metres by the end of 2015.