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LNG World Shipping

LNG production boom needs 65 more ships by 2020

Thu 28 Jul 2016 by Karen Thomas

LNG production boom needs 65 more ships by 2020

LNG shipping may flip from oversupply to a shortage of vessels by the end of the decade, unless the industry starts to order new tonnage now, a report published today has claimed.

So far this year, just four LNG newbuildings have been ordered. But with 125 million tonnes of new production capacity under construction, the market could switch from over to undersupply of ships within two years, Drewry Shipping predicts, as the long-term outlook for LNG shipping “is still strong”.

In Drewry’s latest LNG Forecast, lead LNG shipping analyst Shresth Sharma says: “The reason for our optimism is that almost 125 million tonnes (mt) of capacity is being built and there are plans for more.

“As a majority of the supply from plants under construction has been contracted on long-term agreements, it is likely that LNG will be traded, so requiring more vessels. Despite a widened Panama Canal, new LNG-export capacity due to come online by 2020 will require shipowners to order an additional 65 vessels over this period to meet shipping demand.”

Drewry retains a “bullish” long-term outlook for LNG shipping, despite the fact that spot rates for dual-fuel diesel-electric (DF-DE) LNG carriers have remained around US$30,000 a day since second-quarter 2015, down 80 per cent from the most recent market peak, in 2012, reflecting strong fleet growth and weak cargo demand.

This explains why shipowners have ordered just four ships so far this year, having ordered an average of 44 a year during the previous five years, Drewry says. However the impact of slowing orders may make itself felt in 2019, when almost all the new export capacity under construction is due to come to market, it warns.

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