LR: Five Factors Affecting The LNG Transportation Market In 2018

- Apr 04, 2018-

Since 2017, the LNG transportation market has sprung up and become the hottest segment in the shipping market. In the past winter, the spot market price has soared to a new high in four years, and the entire market has high hopes for this sector.


According to the Lloyd's quarterly forecast report, the average annual freight rate for LNG ships with a dual fuel capacity between 150,000 cubic meters and 180,000 cubic meters will reach US$60,500 per day, after the agency’s forecast of US$55,429 per day. The soaring of LNG shipping market has little to do with capacity, because even in the next quarter, the number of new ships is still large, and as the market becomes popular, the price and quantity of shipbuilding are also rising.


The main reason for the market's rise is the outbreak of demand. LNG has been hailed as “future fuel” by many agencies, and the annual seaborne trade volume has maintained double-digit growth. This trend will continue because of the increase in U.S. exports, the increase in China’s imports, and the implementation of Russia’s Yamal project. Of course, there are also some factors that may affect the future demand of the market, such as the interruption of the supply of ExxonMobil's LNG project in Papua New Guinea. However, on the whole, the outlook for the LNG transportation market is still very optimistic. glenflange


The main influencing factors are divided into five categories:


The first category US exports

Although later than expected, the second LNG export port in the US, located in Cove Point, Maryland, was put into use in early March, marking the official start of the “Golden Age” of US LNG exports. In addition, another export terminal in Freeport will also be put into use this year. The U.S. Energy Agency predicts that in the United States, LNG exports will increase to 3 billion cubic feet per day in 2018 and 1.9 billion cubic feet per day in 2017. Although the current sample size is small, past data show that U.S. exports mainly flow to the Atlantic Ocean and the west coast of the Gulf of Mexico. However, as Asian demand strengthens, there will be a larger increase in the turnover of LNG in the future. In the past winter alone, the shipment of energy giant Czerny Energy to Sabin Pass has soared. Chelny plans to build 20 new ships to meet future demand, and the main flow of goods is in Asia. In the future, more U.S. producers will enter the transportation market, and their demand for ships may benefit shipowners.


The second type of Chinese imports 90 deg. elbow LR

China's imports have increased dramatically. According to statistics from ASKCI Consulting, China's LNG imports, the world's largest energy importer, reached 38.1 million tons in 2017, an increase of 46% year-on-year. The Chinese government pays more attention to environmental governance and hopes to replace traditional coal-fired boilers with natural gas or electricity for heating in northern China. The plan will continue until 2021. Although market participants believe that China’s import growth will be difficult to maintain in 2017, the increase will remain very strong. China had previously mainly imported LNG from Australia and Qatar, but in the future, with the Trump administration’s strong promotion of US energy, China is likely to include the United States as a major supplier, and the LNG transportation market will benefit from this. It is worth mentioning that the practice of using natural gas instead of coal has recently received some criticism. The local government and related companies have found that such radicalization not only brings about huge expenditures, but more importantly, the infrastructure of many cities in the north Not supporting such a transition, the Chinese government is likely to accept such an opinion in the current year's adjustment and ease the reforms. However, before the Russian market began to use pipelines to transport LNG to China, it is unlikely that there will be a substantial decline.


The third type Yamal project ANSI B16.5 Flange

The progress of the current progress of the Yamal project is very good. At present, the estimated annual production is 5.5 million tons. Since the first batch of goods was delivered at the end of 2017, more than 1 million tons of goods have been sent out from now on. On the surface, the impact of the Yamal project on the demand of the transportation market is not significant, because only 15 specially-made icebreakers have the ability to transport back and forth. However, from the actual situation, in the winter, these icebreakers carry LNG to transit ports, and other LNG operators need to transport these LNG to the final user terminals. Therefore, the positive impact of the project on the market lags behind. In addition, the supply of the project will continue to put pressure on LNG prices in Europe, which will make the transportation from the Atlantic to Asia more economical. This is also a big plus for shipowners. In the summer, however, these icebreakers will flood into the market for contracts, which will put even greater pressure on the summer market, which has little demand. Overall, the Yamal project will need more ships to provide transportation services in the future, but it may take some time to see the project's impact on the entire market.


The fourth type of force majeure

The 7.5-magnitude quake that occurred on February 26 caused Exxon Mobil to close its LNG project in Papua New Guinea. The annual output of the project was 6.9 million tons, but its actual production exceeded expectations in the past few years. This incident shows that although LNG transportation is currently hot, it still faces some uncertain risks. Although Exxon Mobil has stated that the company's LNG supply will not be affected by this, they will find ways to redeploy volume from elsewhere, and for affected Asian customers, they will easily find alternatives in the market. . The most affected by this time is the supply of ships in the spot market. ExxonMobil said that repairs are expected to last for about eight weeks. Ships originally scheduled to load LNG from this section of the project will flow into the market, and the market is currently in the season. In the short term, the freight rate will be under pressure.


Category V Newbuilding Market ASME FLANGE

The recent surge in shipping demand has led people to ignore the fact that the growth of capacity is actually growing at a rapid rate. In other words, oversupply is still possible, especially since the current market is in an off-season. Lloyd's data shows that the current global active LNG ships total 488 ships, with a total capacity of 73.2 million cubic meters, up 7.3% year-on-year, and in the coming year, there are still 7.6 million cubic meters of ships will be coming Into the market. On the positive side, most of the ships are tied to mining projects. This also means that they will not affect the spot market, but if the project is delayed, shipowners have to put these new ships into use, and the freight market will It is under great pressure. Looking further ahead, even by 2019, the growth rate of capacity will still be rapid. Currently, there will be 41 ships to be delivered in 2019, with a total capacity of 6.6 million cubic meters. Worse, more and more investors are pouring into this sector. VesselsValue's data shows that since 2018, the number of new ships has reached 15 ships, with a total capacity of 2.5 million cubic meters, and the entire year of 2017 will be only The 11 vessels have a total capacity of 1.6 million cubic meters.