Atlantic LNG: March charter rates rise sharply

Charter rates for LNG carriers fixed on a spot basis for March loadings rose sharply on Friday, as market activity for the period strengthened and expectations for thin availability increased.

The spot rate for a tri-fuel diesel-electric carrier fixed for March in the Atlantic basin rose to around $150,000/d from $81,500/d a week earlier, while the corresponding east of Suez rate increased to $140,000/d from $76,000/d.

The rise came on the back of prompt rates posting sharp gains on Friday, after BP chartered the 175,000m³ LNG Abalamabie for a Bonny Island loading in early February at around $350,000/d, and trading firm Trafigura released a requirement for an early February US loading at around the same rate.

Market activity began to shift from February to March fixtures, market participants noted, despite there being around 6-7 weeks before most March fixtures would start. A number of charterers are already seeking vessels to load cargoes in March, including India's IOC.

A number of US fob offtakers opted to turn down February volumes in December, because of an inability to find the vessels to load their contractual cargoes. Offtakers that opted not to turn down their February volumes are now finding themselves with cargoes that they cannot find the tonnage to load. Trading firms have been active in seeking these distressed fob cargoes, leveraging their size in the market to secure vessels to load them and sell into European markets, market participants said.

Concerns that vessel availability could remain tight through March has helped to focus market activity around the month, as firms make sure that they can secure carriers to load their US March cargoes ahead of the first cancellation deadline, which is US operator Cheniere's on 20 January.

And availability is expected to remain thin, market participants said, with vessels delivering US volumes loading in February to northeast Asia expected to remain employed until around April, given the round trip of around two months.

But expectations that tonnage demand will slow in March from January-February highs has held the spot rate spread for February-March in backwardation in recent weeks. European buyers have remained more competitive for unsecured March-loading cargoes from the US than their competitors in northeast Asia, with the sharp backwardation in northeast Asian prices unmatched by European des prices, suggesting that inter-basin spot cargo flows could slow from March through the second quarter.

That said, global liquefaction capacity is set to rise slightly this month, which could buoy loading demand for carriers, with Australia's 3.6mn t/yr Prelude expected to come back online following an 11-month downtime. And a gas leak near Nigeria's 22mn t/yr Bonny Island liquefaction facility has not affected feedgas deliveries to the export terminal, Eni told Argus on Friday.