Deliveries of newbuild LNG carriers are set to quicken through this winter before slowing in the 2021 summer and ramping up again as the year closes.
There are 14 new LNG carriers scheduled for delivery in October-December and 15 expected in the first quarter of 2021. All these planned deliveries have capacities of 173,400-180,000m³, with two-stroke propulsion and low boil-off rates, making them larger and more efficient than the majority of the existing global LNG fleet.
Although deliveries are set to slow marginally over the summer quarters from winter — with 12 in April-June and nine in the third quarter — they are scheduled to be marginally higher than a year earlier. New additions to the global LNG fleet are then set to jump again by 14 carriers over the fourth quarter of 2021.
Shipyards have already delivered around 22 carriers so far this year, with a further three expected to join the global fleet before the end of this month, suggesting that a total of 38 new carriers will be delivered by the end of this year.
But 2021 deliveries are expected to rise to 50 carriers, outstripping annual deliveries in recent years, with around 35 delivered in 2019 and 48 in 2018.
Deliveries weigh on forward rates
Expectations of quick deliveries this winter has weighed on forward spot charter rates for fixtures throughout 2021. Average rates for 2021 are currently at around $51,500/d, compared with $60,300/d for 2020 average rates in mid-September last year.
Loading demand growth is also set to slow in 2021 as global liquefaction capacity stagnates, following the completion of the first wave of US export projects earlier this year. Increasing loading demand had helped to balance new additions to the global fleet in recent years, but around 9.7mn t/yr of capacity is planned to be commissioned in 2021, down from 24.5mn t/yr this year and 21.1mn t/yr in 2019.
Straight to the top
The newbuild deliveries for the coming winter and rest of 2021 will likely be at the top of the LNG freight market merit order, with their greater capacities, lower boil-off rates and fuel consumption making them more competitive than much of the existing fleet.
Many of the new LNG carriers are likely to go straight into long-term charters, reducing demand for short-term charters for dual/tri-fuel diesel-electric (D/TFDE) carriers, to cover winter demand or meet firms' tonnage demand before their long-term charters start.
This may buoy the availability of D/TFDE vessels on the spot charter market, adding even greater pressure on demand for older steam turbine vessels, which are typically at the bottom of the fleet merit order, and priced at a discount to the D/TFDE carriers.
The pressure on steam turbine vessels — a number of which are set to roll off long-term charters into the spot market in the next two years — could drive scrappage higher that the 2-3 vessels scrapped annually in recent years should steam turbine spot rates slip below running costs.
That said, conversions of the steam turbine vessels to floating storage and regasification units (FSRUs) for use with smaller import projects — such as those planned in South America — could stem scrapping, although demand for FSRUs of this size are limited. And these FSRUs, because of their lower capacities making them better suited to smaller import projects, are unlikely to face significant competition from newbuild FSRUs, which are typically ordered for projects with a greater intended import capacity. There are five FSRUs on the global order book, with capacities ranging from 174,000-180,000m³, compared with most steam turbine vessels that have a capacity of around 135,000-150,000m³.
