Atlantic LNG: TFDE day rates edge up

Day rates for LNG vessel spot charters have inched higher in recent days, with west of Suez rates remaining at a premium to their east of Suez counterparts.

West of Suez rates for tri-fuel diesel-electric (TFDE) vessels were at $69,000/d on Tuesday, up from $68,000/d at the end of August. East of Suez rates rose to $66,0000/d from $65,000/d.

The prospect of firms delaying deliveries to northwest European terminals to capture the steep contango at the region's gas hubs may have supported freight rates in the Atlantic basin compared with east of Suez rates. The Dutch TTF October contract was at $3.88/mn Btu on Tuesday, at a $1.08/mn Btu discount to the November market.

A US offtaker loading in October and delivering to northwest Europe the same month would achieve returns of $3.30/mn Btu, based on prevailing prices and day rates. But they could achieve around $4.40/mn Btu if they deliver the cargo in November. The added cost of floating the cargo for around two weeks weeks based on prevailing day-rates and assuming a boil-off of 0.1pc per day would be 33¢/mn Btu, which could be low enough to justify delivering at a later day, although boil-off may vary depending on sailing speeds.

But only firms with adequate shipping capacity may be able to slow sail or float cargoes in order to delay deliveries until November. And TFDE rates were expected to climb above $100,000/d in the coming months which could discourage firms that do not have vessels on long-term charter, and therefore do not consider shipping costs as sunk, from slow sailing between the US and Europe.

The planned ramp up in US liquefaction could also leave some firms short on shipping capacity, market participants said, although requirements for commissioning cargoes have already been covered.

The 155,300m³ LNG Jurojin was still docked at Freeport as of Tuesday evening after arriving on 30 August. The tanker was loading the initial test cargo from the first 5mn t/yr train at the terminal. And the 145,000m³ Methane Heather Sally has been anchored nearby Freeport since 27 August, after delivering a Nigerian cargo to Mexico's Altamira terminal.

But the Argus northeast Asian (ANEA) des price for October narrowed its premium to the November price to 64¢/mn Btu on Tuesday, from as wide as $1.01/mn Btu on 15 August, which could reduce the incentive for slow sailing of prompt US fob cargoes to northeast Asia. Given US-loaded cargoes take around 30 days to be delivered to northeast Asia, firms loading a fob cargo in the US will seek to deliver to northeast Asia against at earliest the following month's des price.