DW predicts sea change in LNG

Douglas-Westwood (DW) has released an article stating that market developments in the next 5 years are expected to have a significant impact on the construction of LNG carriers, as well the primary LNG trading routes.

The company claims that there is currently an oversupply of LNG carriers and that a combination of reduced imports from key consumers, such as Japan, with low commodity prices, has caused significant decline in charter rates for LNG carriers to approximately US$25 000/d. This is considerably below typical breakeven costs of US$40 000. DW notes that in 2015, 36 carriers were delivered, whilst in 2016, only four newbuilds have been ordered (at the time of writing).

Nonetheless, DW expects that this trend will change over the 2017 – 2021 period, largely due to a number of liquefaction projects expected to come onstream in both North America and Australasia. The US, for instance, is forecast to increase its export capacity to 77 million tpy by 2021. This is compared to just 11 million tpy in 2016. In order to satisfy this growing supply, in DW’s World LNG Market Forecast Report 2017 – 2021, the company forecasts the delivery of more than 150 units yet to be ordered from 2017 to 2021, in addition to those orders already placed.

DW claims that the US’s transition to becoming a major LNG exporter will lead to diversification of the primary LNG trade routes. In particular, the company notes that the expansion of the Panama Canal allows it accommodate larger LNG tankers and provides a way for vessels travelling to Asia and South America from the Gulf Coast to decrease the times of their voyages. Ultimately, DW claims that this will generate further competition on LNG trading routes.

Edited from press release by David Rowlands

Read the article online at: https://www.lngindustry.com/lng-shipping/19092016/dw-predicts-sea-change-in-lng-3066/