LNG tanker owners face falling profits as projects delayed

December 13, 2012 - 7:50:59 am


LONDON: Gas tanker owners face falling profits over the next few years as delays to Australian gas project leave new ships unemployed, though the tankers will earn more than other commercial vessels at least until 2016, brokers and analysts said.

The liquefied natural gas (LNG) tanker market has been the only bright spot in an otherwise depressed shipping sector after a global surge in the demand for gas, led by Japan in 2011, boosted trade and tied vessels to longer routes, stretching the capacity of the global fleet.

Gains in spot LNG tanker day-rates have lost momentum in recent months, after quadrupling in the years since 2010, and are likely to decline further in 2014 and 2015 given gas project delays and rapid fleet growth, the sources said. 

“If you look at the pure fundamentals, there is some ground to think there will be oversupply,” a source from a major LNG shipping brokerage said.

The main drag on spot LNG day-rates is the number of vessels coming to market that are not committed to long-term projects and which will instead depend on spot demand.

Around one third of the 86 vessels ordered since 2011 are earmarked for spot charter business, some brokers said. The total value of the new-build LNG tanker market amounts to around $17bn, based on the average cost of a tanker. 

Delays in the construction of liquefaction plants mean there will be less fuel to transport than previously expected, idling new vessels and bringing down spot rates.

Day-rates should drop to about $100,000/day in 2015, Arctic Securities analyst Erik Stavseth said, compared with record highs of $160,000/day earlier this year and $120,000/day currently.

“In 2013 there are still a number of LNG vessels delivering that don’t have employment yet. Ten out of the 25 vessels expected next year haven’t been fixed,” the source from a brokerage said.

“In 2014 the situation is even worse, 22 vessels are not committed yet ... A total of 41 vessels are expected in 2014, so more than half won’t have employment,” according to the source.

Another 18 vessels are due to be delivered in 2015 and 2016.

Shipowners traditionally preferred that newly built ships be tied to specific projects. 


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