Shipping Spotlight Turns to LNG

By Barry Parker (gCaptain) –

In a landscape where each shipping sector is taking its turn in the spotlight, Liquified Natural Gas (LNG) tankers have been waiting for their time in the limelight.

Daily hires in excess of $200,000/day for modern TFDE/DFDE vessels are now being reported in brokers’ market reports, with newer “state of the art” two stroke MEGI/XDF ships being pegged with numbers above $300,000/day. This will likely shove those vessels onto the stage very quickly.

For comparison, a recent research report from Evercore ISI, citing data from Clarksons, put the late September 2022 spot time charter hire for TFDE ships (with 160 cumtr cargo capabilities) at $207,500/day, compared to $137,500/day in mid September 2022, and just above $68,000/day in August 2022. 

What’s changed so fast? In the face of sanctions on gas supplied from Russia, Europe has been building up its stockpiles, seemingly getting ahead of the coming winter. However, recent concerns about undersea leakages and possible sabotage of the Nord Stream pipelines are putting fresh eyes on to gas transport.

Jefferies’ shipping analyst Omar Nokta wrote: “LNG spot shipping rates continue to climb higher following the reported leaks in the Nord Stream pipeline (the pipeline sends Russian natural gas into Germany). As continues to be the case, tight vessel availability is boosting rates to high levels.”

Stifel’s shipping equities analyst Ben Nolan offered that: “European buyers have also been purchasing LNG and keeping the ships with LNG on board for sale later in the year as the weather becomes colder and inventory draws begin to occur. The effect is to soak up ship capacity causing shipping rates to move higher.” He also pointed out that vessels have been pulled out of the trades for use as FSRU (floating storage and regasification units). 

Emily McClain, Vice President at Rystad Energy, leading analysts of the sector, said in a market report: “Gas prices appear like a leaf in the wind, with little indication on how far they will be carried and in what direction.” In explaining the tricky market dynamics for the commodity, her report added: “Early this week, European gas prices fell to almost $50 per MMBtu on the back of high storage levels at more than 87% full, but quickly rose on news of the damage to both Nord Stream pipelines. We cannot expect prices to drop any time soon – at least not until we see some form of improvement in supply.”

Prices for the molecules in Europe had reached over $100 in early summer 2022 before backing off. 

Concerning the ocean shipping of LNG, Rystad’s McClain reiterated the message from the shipping analysts, writing that: “Liquefied natural gas (LNG) carrier rates have been on the rise as buyers rush to secure LNG volumes early this year given the uncertainty in global gas supplies and the Northern Hemisphere winter outlook.”

For trade flows, geopolitics is a big driver. Reporters at Reuters, using data from Refinitiv Eikon, have said: “The United States has boosted overall LNG shipments over the last 12 months, with more vessels going to Europe due to the continent’s need for more gas as Russia throttles back supply.” U.S. exports are still lagging, due to an early June explosion at the Freeport LNG facility; the LNG cargo seller hopes to be near to its early 2022 export levels by November. 

Among public companies in the vessel sector, another Master Limited Partnership (MLP), Höegh LNG Partners LP (which had been listed on the NYSE as “HMLP” and was active in providing FSRU capacity) was rolled up into the privately held parent- Höegh LNG Holdings Ltd. This follows a trend where other listed MLP’s-those tied to Golar LNG and Teekay LNG were also taken private.

GasLog Partners LP (NYSE: “GLOP”), tied to the Ceres Hellenic Group (P. Livanos) remains listed, though its sister company GasLog Ltd (the General Partner of the public entity) was privatized in early 2021. Another MLP, Dynagas LNG Partners (tied to Prokopiou) also continues to trade with symbol “DLNG” on the NYSE.

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