Exceptional Growth in LNG Trade, Says Awilco

The exceptional growth in LNG trade recorded in the first half of the 2019 continued in Q3, says Awilco LNG Group, the Norwegian based fully integrated pure play LNG transportation provider.

According to Fearnleys LNG total LNG trade is up about 13 % in the first nine months of the year vs last year. In line with normal seasonal patterns gas prices inched upwards in Q3 but remained historically low due to increased production and muted demand in the Far East.

Due to a relatively mild winter reducing gas demand for power generation and higher nuclear power generation in Japan and South Korea, LNG imports decreased by 8 and 9 % y-o-y Jan-Sept respectively, whereas imports to India were up 3 % and imports to China increased by about 21 % y-o-y.

Europe has been the main buyer of incremental LNG volumes in 2019, growing imports by 74 % y-o-y to about 65 MT and taking advantage of low gas prices to switch its energy mix from coal to gas. European storage levels were about 97 % full at the end of Q3, which is about two months early compared to historical average peak of pre-winter up-stocking.

As a result, and in combination with contango in gas prices in the Far East, a number of LNG carriers have been employed as storage in both basins.

Total shipping demand as expressed by growth in ton-mile increased by about 7 % in the first nine months of 2019 compared to a fleet growth of 9 % according to Fearnleys LNG.

Taking into account storage and slow steaming (ton-time), shipping demand increased by about 12 % in the period, which supported a firming shipping market.

According to Fearnleys LNG headline spot TFDE day rates started the quarter at USD 50,000 and USD 40,000 per day West and East of Suez respectively, and gradually increased to USD 88,000 and USD 83,000 respectively end Q3. Ballast bonus compensation improved along with the increase in headline rates.

In spite of the current low gas price environment, with global gas prices at their lowest for 10 years, 2019 has seen an all-time high in final investment decisions on new liquefaction capacity.

A total of 64 MTPA of new capacity has been sanctioned in 2019, representing about 20 % of total LNG traded in 2018 at 325 MTPA. In total 111 MTPA of new LNG production capacity is under construction and expected to commence production in 2020 to 2026.

According to market analysts a further approx. 800 MTPA of new LNG production is in various stages of planning.

33 vessels were delivered in the first nine months of 2019 and a further 6 vessels are scheduled for delivery in the remainder of 2019. Year to date 34 vessels have been ordered of which 20 are assumed speculative. 24 of the 34 newbuild orders were placed in H1 2019 and the ordering pace appears to have subsided in H2 2019.

According to shipbrokers the current orderbook for LNG vessels above 150,000 cbm (excl. FSRU and FLNG) is 106 vessels, of which about 40 are assumed available for contract. 40 vessels are scheduled for delivery in 2020, 44 in 2021, 16 in 2022 and 1 in 2023.