28 October 2024
Jan Fraser Jenkins met with Marsoft’s LNG shipping market team, Hauke Kite-Powell and Ryan Uljua, to get an update on their view of recent market developments. This interview has been condensed for clarity.
Hauke, Marsoft’s forecast that spot rates could fall below $50,000/day during the 2024/25 winter season came as a surprise to many. Now we are seeing reports that the market is below $30,000/day. Can you confirm that the market is that bad?
In all fairness Jan, our Base Case called for rates to average around $75,000 this winter season so the recent decline in rates – and I can confirm those sub-30 rates – does represent a fundamental change in market conditions, with market instead developing more along Marsoft’s Low Case trajectory so far this quarter.
What is behind the collapse in rates? Is it a short- or long-term phenomenon?
Asian demand weakness is the key. European import demand has been soft, as expected, but Asian demand growth has slowed substantially. In China the lower demand may be attributable to the recent restructuring of the domestic natural gas industry. We will be reporting on these developments in our upcoming market report.
Is there anything else at work pushing rates down? We read a lot about the heavy LNGC orderbook – is that playing a role now?
Deliveries have accelerated steadily, with 3.1m cbm added to the fleet in Q3, and 4m cbm expected this quarter – double the quarterly rate from a year ago – which is putting substantial pressure on rates, says Ryan Uljua. Still, we see increasing LNG liquefaction capacity and favorable pricing dynamics as supporting rapid demand growth so those ships should be absorbed in the long-term. However, there’s a timing mismatch, as fresh vessel capacity is entering the market faster than LNG liquefaction projects can come online.
Thanks very much for the highlights! When can we expect to see Marsoft’s next update?
We will release the updated outlook before Thanksgiving in the United States – in the next four weeks – and look forward to discussing with our clients shortly thereafter.
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