Atlantic LNG: TFDE rates fall

Spot charter day rates for tri-fuel diesel-electric (TFDE) LNG carriers fell on Friday, amid low additional demand in both basins and increased vessel availability.

Charter rates for spot fixtures west of Suez were assessed at $102,000/d on Friday, down from $104,000/d at Thursday's close and $6,000/d lower than Monday's assessment. Spot TFDE rates for the west of Suez had increased sharply at the start of the winter period but have declined from a peak of $145,000/d in late October.

Vessel availability in both basins has risen in recent days, but more firms were heard to be repositioning vessels to the US Gulf Coast from the Pacific basin, where rising US liquefaction capacity has buoyed tonnage demand, market participants said.

The Argus Gulf Coast (AGC) six-month curve has mainly been tracking European delivered prices in recent months, as European markets have been offering higher returns for uncommitted US cargoes throughout most of the past year. US trade flows remaining mainly directed towards Europe in the coming months could keep a larger number of vessels in the Atlantic basin, and possibly require more ships to relocate to the Atlantic basin.

The inter-basin arbitrage has remained tight in recent months amid weak demand from the Asian market. Longer voyages to northeast Asian destinations, compared with European import terminals, have a $1.27/mn Btu differential between the freight costs associated with delivery to these markets, which is wider than the inter-basin des price differential of $1.17/mn Btu on Friday.

But increasing liquefaction capacity in the US Gulf Coast may support charter rates in the coming months if tonnage is needed to store volumes in shoulder seasons, market participants said. The use of vessels as floating storage units was behind the spike in charter rates at the beginning of the winter, although the increase in tonnage demand had been prompted by a steep contango in delivered prices. Slow demand, particularly in the Asian markets, could weigh on des prices and reduce incentive for offtakers to pay for high shipping costs, as they may not be covered, market participants said.

US export capacity is set to expand by over 10.1mn t/yr by the end of January, with the second trains of both the Cameron LNG and Freeport LNG projects scheduled to be commissioned by the end of next month. The 5mn t/yr Cameron LNG project is ramping up production, with its second 5mn t/yr train starting to receive feedgas on 2 December. Also, the 5mn t/yr second train of the Freeport LNG project began producing LNG on Friday, and is expected to load its first cargo in January.

The bid-ask range was heard at around a $10,000 spread for TFDE vessels across basins, with few fixtures done despite requirements from charterers heard looking to load cargoes in the US Gulf Coast.

And the 9mn t/yr Australia Pacific LNG (APLNG) plant has put forward a freight requirement for 12 loadings covering its recent tender for up to twelve LNG cargoes for next year.