Atlantic LNG: Charter rates extend gains

Charter rates for LNG carriers extended gains on Friday, which could reduce the incentive for US-loaded cargoes to be delivered outside of the Atlantic basin.

Spot charter day rates for tri-fuel diesel-electric (TFDE) carriers rose to $88,000/d in the Atlantic basin and $82,500/d in the Asia-Pacific basin, from $83,000/d and $79,000/d a day earlier, respectively.

Freight costs for LNG deliveries have soared by over $13,000/d in both basins over the past week because of tighter vessel availability. The production ramp up at US liquefaction facilities has increased tonnage demand, while firms have secured additional vessels or charters for longer periods to be able to take advantage of the contango in near-curve delivered prices.

Some fixtures for December were being negotiated for as much as $100,000/d, market participants said, although it was unclear whether any deal had already been closed at this level.

Tighter availability of LNG carriers may have also reduced discounts shipowners grant on ballast rates and fuel costs, market participants said. A 25pc discount on the ballast leg of the journey was still applied in the Asia-Pacific basin until last week, but a similar discount had already disappeared from Atlantic basin fixtures, market participants said.

A tight shipping market reduces the scope to purchase volumes on an fob basis. Firms offering fob cargoes have received little market interest in recent days, participants said. Egyptian firm Egas has recently cancelled a tender for six October-November cargoes, but some market participants said four of these cargoes were later sold to a trading firm at a premium to corresponding NBP prices, although the purchaser was allowed to retain an opt-out option.

The 155,000m³ British Sapphire left Egypt's 7.2mn t/yr Idku terminal on Friday and was heading to Malta, although market participants said it was expected to deliver at France's 9.4mn t/yr Dunkirk terminal. The vessel delivered a Trinidadian cargo to Israel's 4mn t/yr Hadera terminal last week, suggesting the firm closing the deal may have taken advantage of low repositioning costs.

Egas may have little incentive to sell LNG cargoes even at parity with European hub prices at present. The NBP October contract was changing hands in the mid-$3/mn Btu in late September when the Egas tender closed, which was below the cost Egypt pays international oil companies for gas produced at the most expensive offshore projects, which ranges between $3.81-4.66/mn Btu. These projects account for the majority of Egyptian gas production, which has been rising steadily in recent months.