2014-2015 LNG Shipping Demand Predicted to be Weak

by Ship & Bunker News Team
Wednesday August 27, 2014

This year's LNG Shipping Market Annual Review and Forecast by shipping consultancy Drewry finds that global liquefied natural gas (LNG) shipping has dropped off in recent years, and the market will face continuing weak demand in the near future, but in the long-term, the sector could face a vessel shortage as demand rises, the firm said in an emailed statement.

LNG shipping fell in 2013, with many liquefaction facilities experiencing unplanned shutdowns.

Imports fell 45 percent for the U.S. and 42 percent for Canada as domestic natural gas production rose, while imports to Europe dropped 23 percent thanks to lower demand and more use of piped gas.

Japan, which has been seen as a big import market for LNG, is expected to stop increasing its use of the fuel as it restarts its nuclear power plants.

Despite the low demand, Drewry expects LNG fleet growth to rise at 8 percent this year and next, hitting 66 million cubic meters by the end of 2015.

"A deadly combination of expanding vessel fleet, limited cargo availability and falling trade caused short-term freight rates for conventional LNG carriers to decline through 2013 and the first half of 2014," said Drewry's lead gas shipping analyst Shantanu Bhushan.

Bhushan said 64 billion cubic meters per annum of liquefaction capacity is scheduled to come online in 2014-2015, but it is unclear whether these projects will move forward on time, or whether demand will grow to meet them.

"As a result, the outlook for unchartered vessels over the next 18 months is not favourable and we expect spot and short-term freight rates to remain under pressure."

Later in the decade, however, Drewry expects new projects in Australia and North America to boost the demand for LNG carriers.

"Drewry cautions shipowners that the anticipated rise in cargo traffic may take them by surprise," Bhushan said.

"We expect that the LNG shipping industry will need many more vessels in the latter half of the decade than are currently on order."

Citing some of the same issues Drewry mentioned, a report last year predicted that spot rates for LNG shipping would be unprofitable for two years, dropping from $108,000 per day in 2013 to $92,000 in 2014, and $69,000 per day in 2015.