Atlantic LNG: Spot charter rates rise

Spot LNG charter rates for tri-fuel diesel-electric (TFDE) carriers extended gains on Friday as wide time spreads in both European and Asian delivered markets increased the incentive to delay deliveries or use carriers as floating storage units.

Spot rates for TFDE vessels located west of Suez were assessed at $37,500/d on Friday, up from $35,000/d at previous close and $32,000/d on 1 July. West of Suez spot rates have risen gradually since 15 June, when they were assessed at $32,000/d, which was the lowest Atlantic basin rate for this class of LNG carriers since May 2016.

A contango structure in both the Dutch TTF gas hub and Argus northeast Asian (ANEA) des curves provided scope for storing cargoes at sea for deliveries into the fourth quarter. The Argus northeast Asian (ANEA) des October price held a 38¢/mn Btu premium to the corresponding September price, while the TTF September-October spread was 58¢/mn Btu. The open inter-basin arbitrage for September loadings at both US and west African export facilities may have contributed to buoy tonnage demand later this summer, with the differential being sufficient to cover the additional shipping costs.

A wide differential between Indian and European delivered markets could also increase the incentive for west African cargoes to be shipped to India in September. Shipping a cargo from west Africa to India costs 12¢/mn Btu more than a delivery to northwest Europe, based on Argus Round Voyage (ARV) freight costs, compared with the India-northwest Europe second half of September differential of 51¢/mn Btu, unchanged from a day earlier.

The prospect of fewer cancellations from US export terminals in September may also buoy spot tonnage demand, with around 20 September-loading cargoes heard turned down, compared with around 40 cargoes heard cancelled for loading in August, as US fob prices in September held above feedgas costs as they tracked Asia-Pacific markets. The contango structure in ANEA des prices could also reduce the incentive to sublet tonnage onto the spot market, market participants said, as firms may not wish to utilise available tonnage for August loadings and potentially miss the opportunity to take advantage of wide time-spreads in the ANEA des curve.

But the global LNG carrier fleet is expected to expand this quarter, with the deliveries of around 14 newbuilds. This could support spot vessel availability and in turn weigh on charter rates later this summer. Three carriers were delivered in July — the 173,400m³ BW Pavilion Aranthera and the 180,000m³ Gaslog Westminster, alongside the 174,000m³ Flex Aurora, — and immediately entered long-term charters.