Global LNG fleet to be well supplied in 2025-27

The global LNG fleet looks likely to be well supplied in 2025-27, as the addition of new LNG carriers is expected to outpace loading demand from new liquefaction capacity.

Some 251 newbuild carriers are due to be delivered in 2025-27, according to data from the International Maritime Organisation (IMO). But loading demand from 124mn t/yr of new liquefaction capacity over the same period may only require 171 additional carriers (see graphs and projects table).

This scenario assumes 160,000m³ loadings and a 17 knot sailing speed(see scenario table). This scenario does not include loading demand from Nigeria LNG's 8mn t/yr seventh train at the 22mn t/yr Bonny terminal, as feedgas at present is lower than loading demand from the terminal's present liquefaction capacity, or loading demand or vessel additions linked to Russia's 19.8mn t/yr Arctic LNG 2 project, which has been placed under US sanctions. This scenario also assumes no Suez or Panama canal voyages.

Should deliveries from the US Gulf to northeast Asia via the Cape of Good Hope rise to 50pc of loadings from the new liquefaction capacity instead of the assumed 33pc, then loading demand could rise by a further 20 carriers.

And if each carrier had an average of five days of additional idle time between round trips, then loading demand could rise by a further 23 carriers.

If both of the above scenarios turned out to be the case, and all newbuild carriers were delivered on time, then newbuild additions would still be more than sufficient to cover loading demand from new liquefaction capacity. And in the past few years, new LNG terminals have faced greater delays than new LNG carrier deliveries, suggesting scope for an even better supplied fleet in the coming years should this trend continue.

The projections follow a well-supplied past year for the global LNG fleet, with 53 carriers delivered over the past 12 months, compared with new liquefaction capacity over the same period requiring a loading demand of around 6-7 LNG carriers. Charter rates have fallen to record lows this month, in large part because of newbuild additions outpacing loading demand from new facilities.

Running out of steam

The retiring of older steam turbine LNG carriers could limit growth in the global fleet, especially if owners are unable to secure ample employment to cover costs in a market with greater two-stroke and tri-fuel diesel-electric (TFDE) carrier availability.

Some 86 carriers that are at least 20 years old are in operation, according to shipping data from Equasis. Scrappage of older carriers has been in the single digits in recent years, but could rise in the coming years, market participants have said.

Many older carriers have been under long-term charters that are nearing expiry, and could be up for retirement upon the end of the charters. And carriers typically have maintenance around every five years that requires drydocking, which can be costly for shipowners against a prospect of potentially lower charter returns.

An increased number of emissions-based shipping policies from the IMO and the EU, such as the FuelEU regulations starting in 2025, will add to the need for more modern and efficient LNG carriers, further weighing on demand for older steam turbine carriers.

But the prospect of a tighter freight market after 2027, as more liquefaction capacity is due to come on line against an expected relative slowdown in carrier deliveries, could push some owners to keep hold of older carriers in the expectation of future employment, even if they are unable to fix their carriers in the short term.

By Martin Senior

LNG carriers on order

Loading demand from new capacity vs newbuild additions