LNG cargo delays shrugged off as Suez traffic restarts

The restart of vessel traffic following the freeing of the ultra-large container ship Ever Given that ran aground in the Suez Canal on 23 March weighed further on Asian LNG prices, even though LNG vessels waiting to transit the critical waterway might still face delays in reaching their destinations.

Market participants have shrugged off the impact of potential delays to deliveries, expecting available spot supply availability for May to be sufficient to meet demand as more supply tenders for May cargoes have emerged.

Asian spot LNG prices posted two consecutive days of gains from 23 March following news of the canal blockage. But they eased from 25 March as more supplies emerged and European gas hub prices posted losses.

The front half-month of the ANEA price, the Argus assessment for spot deliveries to northeast Asia, rose by around 6.8pc to $7.055/mn Btu for second-half April on 25 March from $6.605/mn Btu on 23 March. But it has since dipped by around 2.1pc, standing at $6.905/mn Btu on 29 March.

There were expectations at the end of last week that it could take days or even weeks to dislodge the Ever Given, raising the prospect of delays to LNG loadings at export facilities in Qatar and the US and affecting deliveries to Europe and Asia, mainly in May. The Ever Given had been blocking the canal and holding up shipments since 23 March.

Around 14 LNG vessels are waiting to transit the Suez Canal in the southbound direction. Eight of these vessels belong to state-controlled Qatargas and are heading to the 77mn t/yr Ras Laffan facility, while the remainder, including one from the US Gulf Coast, are going to Asia, according to a shipbroker. A shipment in the southbound direction from the Suez Canal would head towards Asia and the Middle East. Around six northbound vessels - three ballast and three laden - are heading to Belgium, the UK, Italy and elsewhere in Europe. All three laden cargoes are from Ras Laffan.

Market participants expect it to still take between three and five days for traffic at both ends of the canal to clear, delaying deliveries.

Two Qatar-bound vessels had diverted away from the Suez Canal late last week and taken the longer Cape of Good Hope route to Ras Laffan when it remained unclear when the Ever Given would be dislodged and freed.

The 210,185m³ Al Bahiya and 210,184m³ Al Nuama LNG tankers were originally scheduled to arrive at Ras Laffan before 20 April via the Suez Canal route, before they made a sharp U-turn in the middle of the Mediterranean Sea on 26 March as vessel traffic waiting to transit the canal built up. The Al Bahiya and Al Nuama are now signalling arrival at Ras Laffan on 21 April and 23 April, respectively.

The diversion would potentially add around 13-18 days to each vessel's journey, meaning they could have been able to make it to Ras Laffan earlier had they stayed in the queue at the Suez Canal.

The 3-5-day wait to transit the Canal and diversions via the Cape of Good Hope are expected to push back loadings meant to take place at Ras Laffan between the end of March and early April to the second half of April and first half of May, which will mean that second-half April and first-half May deliveries to northeast Asia may be delayed to the second half of May or even June, market participants said. A shipment from Qatar to northeast Asia takes around 2-3 weeks.

But even with the likely delay of Qatari deliveries and strong consumer demand for May cargoes, spot supply availability to northeast Asia appears ample. Around 10 northeast Asian consumers are showing interest in buying May cargoes.

Spot supplies for delivery to northeast Asia are on offer through tenders from the 6.9mn t/yr PNG LNG project in Papua New Guinea (PNG) and Australia's 8.9mn t/yr Ichthys LNG facility. And at least three other May cargoes are expected to be offered by producers in Australia and Russia in the near term.

By Joey Chua