Atlantic LNG: Charter rates continue rise

Spot charter day rates for tri-fuel diesel-electric (TFDE) LNG carriers rose on Wednesday, having risen through the preceding week as a steep contango in European des prices encouraged firms to delay deliveries to the continent, increasing tonnage demand for floating storage.

Most US offtakers have balanced shipping positions for the fourth quarter of this year, market participants said, meaning any seeking to delay deliveries have had to secure spot charters to ensure their late October-November loading schedules are met. This resulted in a tighter availability of vessels for chartering in late October-November, which has pushed up spot charter rates into early October.

TFDE rates for spot charters west of Suez moved up to $82,000/d on Wednesday from $80,500/d a day before, having risen from $68,000/d on 23 September after holding firm at this level on 13-23 September.

And the October-November price differential at the Dutch TTF gas hub held wide at $1.66/mn Btu as the October contract expired on Monday with a weak October TTF contract, which was likely weighed on by high gas storage levels. This may further tighten vessel availability for deliveries in November as these firms seek to charter additional shipping capacity to replace vessels that are to delay their deliveries, so as to meet these vessels' respective loading schedules.

Vessel availability may hold low for charter periods starting in late November-December, with a similar contango in northeast Asian des prices for November-December. Firms are also seeking to delay deliveries to regasification terminals in the region from November into December, market participants said. But the Argus northeast Asian des price differential for November-December has tightened in recent weeks, with November prices failing to mirror the weakness in the October TTF contract. This may have discouraged more deliveries being delayed in northeast Asia, and could mean that vessel availability does lift slightly.

But vessel availability could rise significantly again towards the end of December through to the first quarter 2020, with tighter time spreads in both European and northeast Asian des prices providing less incentive to delay deliveries to the next month further into the winter period.

Forward spot charter rates for the first quarter 2020 remain at a discount to a quarter earlier, market participants said, with the inter-basin arbitrage for US loadings on forward des prices over November 2019 to April 2020 appearing tight enough to keep most uncommitted cargoes within the Atlantic basin.

That said, additional loading demand from the US, because of increases in the country's liquefaction capacity, will likely hold vessel availability tighter compared with a year earlier. Comparatively few newbuild LNG carriers have come on the water in 2019, with this set to continue through to the third quarter of 2020.