Atlantic LNG: Prompt charter rates slide further

Market: Natural gas
29/01/21

Prompt spot charter rates in both basins continued to retreat on Friday as vessel availability stepped higher on greater offers from charterers seeking to sublet spare tonnage.

The Argus-assessed round voyage rates for US-northeast Asia journeys by tri-fuel diesel-electric (TFDE) carriers — ARV3 — fell to around $132,000/d from $145,000/d a day earlier, while the corresponding ARV2 for US-Europe also slid to $130,000/d from $144,000/d.

Vessel availability for February-March has risen sharply in recent days, as the prompt inter-basin delivered LNG price differential has tightened, leading firms set to deliver US and west African volumes to northeast Asian markets to seek out uncommitted Pacific supply to meet their March selling commitments in the basin. And these firms are now seeking to instead deliver their February-loading Atlantic cargoes into Europe, rather than northeast Asia as initially planned.

Delivery to Europe from the US requires substantially fewer sailing days compared with delivery to northeast Asia — around a fortnight compared with a month. This has left a number of charterers with surplus shipping capacity, which they have brought to the prompt spot charter market to sublet, buoying availability. And with the scope for quick inter-basin flows also narrowing significantly for remaining uncommitted Atlantic volumes, spot charter demand has quickly dissipated.

This has meant that fewer carriers are set to be tied up in two-month round voyages from the US to northeast Asia starting in February and returning to the US in April, and will instead be able to load in the US again in March, given the month round trip for US-Europe. This has buoyed vessel availability for March loadings — when a tight inter-basin des differential had already suggested through most of this winter that US exports may be redirected to European markets — and weighed on spot charter rates west of Suez for the period.

The tight inter-basin des differential for US March loadings has already supported availability east of Suez for February-March, market participants noted, with carriers being heard open in the Pacific basin from February rather than returning to the US for March-April loadings when there is less demand for the vessels.

The Argus-assessed ARV1 — for Australia-northeast Asia TFDE carrier journeys — fell to $105,500/d from $128/000/d on Friday as the incentive for repositioning Pacific tonnage into the Atlantic fell further.

But forward spot charter rates for the second quarter continued to hold their range, despite the falls on the near-curve, with expected tonnage demand over the period continued to hold low on slow inter-basin flows. And availability for the period was still expected to rise on the quick supply of newbuilds into the LNG freight market. A total of 10 new LNG carriers have been delivered so far in January, with a further 10 slated to join the market by the end of March.

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