Spot charter day rates for tri-fuel diesel-electric (TFDE) LNG carriers held on Friday from a week earlier, with vessel availability steady across both basins.
Rates for spot fixtures west of Suez remained flat on the week at $68,000/d, holding a $5,000/d premium to Pacific basin rates, which were unchanged at $63,000/d.
Greater vessel availability in both basins has weighed on charter rates in recent weeks, market participants said, having tightened earlier in the summer. But availability has held steady over the week and left rates unchanged. More TFDE vessels continue to be heard open east of Suez, holding Pacific rates at a discount to their western counterpart.
A tight inter-basin arbitrage for US loadings has meant that most spot volumes have remained within the Atlantic basin, weighing on tonnage demand. And with the forward pricing curves at the UK's NBP gas hub holding tight to the Argus Northeast Asia (ANEA) des curve through winter, additional tonnage demand appears unlikely to materialise.
Firms with unsecured US fob volumes loading in October would attain greater returns from delivering these cargoes to northeast Asia compared with Europe, with an inter-basin differential wider on the prompt. But with market activity for October and early November slowing, the opportunity for significant inter-basin trade flows in October appears to be unlikely.
Inter-basin flows from the 16.5mn t/yr Yamal LNG project to northeast Asia via the Northern Sea Route, though limited this summer, could stop in November as was the case a year earlier. Only the project's Arc7 ice-class vessels can load at its Sabetta port over winter, transshipping in Europe to lower ice-class vessels. Many of these receiving vessels did not remain under charter with the project through the summer, meaning that Yamal was likely to charter more vessels for this winter, weighing on availability over the period.
Operator Novatek was heard on Friday to offer a late October-early November delivery to Europe, with a demurrage charge of around $120,000/d, likely to avoid any risk of disruption to the Arc7 loading schedule.
The hire component of the ballast leg paid by charterers also held broadly unchanged on the week, at around 75-80pc of the laden leg day rate, market participants said.
Charterers of TFDE LNG carriers were expected to bear the cost of fuel on the ballast leg, which has traditionally been fuel oil, with LNG boil-off gas used on the laden leg. But owners and charterers were seeking to retain more heel gas to increase the availability of boil-off on the ballast leg, market participants said, because of the comparatively lower costs of LNG on-ship compared with traditional marine fuels. Fuel oil is required to power some essential vessel functions, but boil-off can be used for a significant majority of the carriers' fuelling demand, they added.
And the 0.5pc sulphur cap under IMO 2020, which comes into force on 1 January, could quicken this movement, market participants said. Compliant very-low sulphur fuel oil (VLSFO) was likely to be priced above traditional, non-compliant marine fuels, widening the premium to LNG prices and encouraging charterers to retain LNG for vessel-fuelling on the ballast leg.
But in the run-up to January, fuel-oil consumption on the ballast leg could be higher, as shipowners seek to use up their stocks of non-compliant fuels.
