Spot charter day rates for tri-fuel diesel-electric (TFDE) LNG carriers fell on Tuesday but remained at some of their highest levels so far this month, as tankers acting as floating storage continued to limit vessel availability in the basin.
Charter rates for spot fixtures west of Suez were assessed at $133,000/d on Tuesday, down from $135,000/d a day earlier and at a $11,000/d premium to Pacific basin rates, which were assessed at $125,000/d on Monday.
Charter rates above $130,000/d in the Atlantic basin could discourage deals on an fob basis. A narrower inter-basin arbitrage has also reduced the incentive for uncommitted cargoes to take the longer journey from US liquefaction facilities to Asia, favouring quicker deliveries to Europe. A further reduction in the number of LNG vessels sailing to Asia, which has already decreased so far this month compared to a year earlier, may lead to even shorter average voyage distances which may in turn increase vessel availability and ease upward pressure on spot freight rates as a result.
The contango in northeast Asian and European prices offering an incentive for slow sailing and floating storage may have continued to support charter rates in recent days. Between 20 and 30 LNG carriers were floating with cargoes onboard on Monday, several of which were in the Atlantic basin, market participants said. A number of these cargoes were loaded at US liquefaction facilities more than a month ago, with at least five tankers loaded in August, according to vessel tracking data.
The 174,000m³ British Sponsor, which loaded a cargo at the 10mn t/yr Corpus Christi facility on 26 August, sailed past the cape of Good Hope at the end of last week and was crossing the Indian Ocean on Tuesday, after 40 days of floating off Cape Town. And the 165,000m³ Diamond Gas Sakura, which left the 5mn t/yr Cameron liquefaction terminal on 18 August, has been slow sailing to northeast Asia via the Cape of Good Hope this month and was set to unload in Taiwan on 11 November.
Sellers may be under pressure to unload these cargoes, market participants said, as the boil-off rate makes it less economical to store LNG on a vessel for prolonged periods of times, market participants said. LNG tankers that have been floating LNG for almost two months may be offering cargoes at a significant discount, which may in turn weigh on LNG prices in the Atlantic basin.
Expectations of mild weather in the coming months in Europe and northeast Asia may keep winter demand in both basins sluggish. And fading Latin American demand may also deprive US exporters of alternative markets where uncommitted cargoes could be unloaded. That said, US exporters may be well-positioned to win a tender issued by Mexican utility CFE for the delivery of one LNG cargo to the 3.8mn t/yr Manzanillo terminal between 16-17 November. The US may be the only supplier, along with Trinidad and Tobago, able to delivery fulfill such a prompt requirement.
