LNG Tanker Earnings Drop

The global fleet of tankers is growing fast

Earnings for liquefied natural gas (LNG) tankers have been cut in half, to about $70,000 per day, over the past year, and new ship deliveries will continue to threaten the sector's profitability, Reuters reports.

Since 2011, owners have ordered 119 new carriers in response to rising demand for gas transport, leading to a projected 30 percent increase in the global LNG tanker fleet by 2017.

However, delays in the construction of LNG projects have kept demand for carriers lower than expected, and the fall in rates over the past year may mean that some owners could have trouble covering their debt payments.

"Some of the highly leveraged owners dependent on spot or short-term business will be close to their breakeven costs at current rates," Erik Stavseth of Arctic Securities said.

Thirty-two vessels were delivered this year, and another 63 are due for delivery over the next two years.

"It is generally accepted that day-rates are not going back to 2011-2012 levels this year as there are just too many vessels available in the market," said Jon Skule Storheill, chief executive of Norwegian ship owner Awilco LNG.

"We need to see more LNG volumes on the water as well as some older vessels disappear first," he added.

Thirteen LNG tankers have been scrapped since 2010, and Stavseth said another 42 are candidates for scrapping.

Drewry predicted last year that supply of LNG carriers could outpace demand through 2015, but new gas projects coming online would absorb the extra capacity in the second half of the decade.