Atlantic LNG: TFDE day rates slip

Spot charter day rates for tri-fuel diesel-electric (TFDE) LNG vessels edged down on Friday and the differential between rates across basins narrowed, as some vessels were heard to be repositioning from the Pacific to the Atlantic basin.

West of Suez spot rates for TFDE vessels were assessed at $108,000/d on Friday, down from $112,000/d a day earlier, while east of Suez rates slipped to $99,000/d from $102,000/d. Vessel availability remained higher in the Pacific basin, but some firms were repositioning carriers to the Atlantic, where tonnage demand could rise as US liquefaction capacity ramps up, market participants said. Charterers may have been holding off issuing requirements earlier this month in hopes of spot rates weakening, market participants said, but with prices only edging lower the past week there has been an increase in inquiries for US-loading cargoes in January in recent days, they added.

A steep contango in northeast Asian and European delivered LNG prices had encouraged firms to delay deliveries of cargoes loaded in September or early October into November. This helped to tighten vessel availability in both basins and supported spot charter rates, which reached a peak so far this year of $145,000/d for west of Suez and $135,000/d for east of Suez on 24 October.

But the inter-basin arbitrage holding shut and reducing the incentive for Atlantic-loaded cargoes to be shipped to Asian markets, as well as increased vessel availability after the eventual delivery of cargoes in November, likely weighed on spot charter rates in recent weeks.

And a flatter contango for northeast Asian and European delivered prices from December-February could provide little incentive for firms to delay deliveries in the coming months. East of Suez forward freight rates for February were assessed at $93,000/d, while rates for the summer were assessed as low as $60,000/d for June. But that was up from average east of Suez spot rates of around $73,000/d in January and $45,500/d in May this year.

But the potential for a rise in liquefaction capacity outstripping the growth in global LNG demand may reduce offtakers willingness to pay high charter rates, some market participants said, although charter rates holding high in recent weeks was a sign that structural tightness could continue to support rates, they added.

Shipowners Flex LNG and Teekay LNG Partners expect the slowing of liquefaction growth to weigh on spot charter rates from the second half of 2020 onwards, while shipowner Gaslog expects the freight market to remain tight until 2021.

The scheduled commissioning of LNG carriers not attached to term charters from mid-2020 onwards may also loosen vessel availability, Teekay LNG Partners said this summer. And a number of older LNG carriers rolling off long-term charter contracts from 2020 could also increase availability on the spot market, market participants said.