Atlantic LNG: TFDE charter rates climb

Spot charter rates for tri-fuel diesel-electric (TFDE) LNG carriers in the Atlantic basin rose sharply on Thursday, as a wide inter-basin arbitrage and delays at the Panama Canal have tightened vessel availability.

The Argus Gulf Coast fob (AGC) May price rose to $6.85/mn Btu from $6.75/mn Btu at the previous close as it tracked northeast Asian delivered markets. Northeast Asian delivered near-curve prices have expanded their premiums to corresponding European des prices in recent days, which has widened the inter-basin differential and buoyed tonnage demand expectations, given the longer journey from the US to Asia compared with Europe. The differential between Asian and European markets also held wide enough to draw Atlantic cargoes loaded in June-October to the Pacific basin, suggesting that tonnage demand could remain supported throughout the summer.

Spot charter rates for TFDE vessels located west of Suez rose to $47,000/d on Thursday from $38,000/d at the previous close, while day rates for TFDE vessels located east of Suez rose to $40,000/d from $33,000/d. The sharp increase in freight rates was mainly due to tighter vessel availability in the Atlantic amid an open inter-basin arbitrage, market participants said.

But delays for vessels crossing the Panama Canal, coupled with larger US export liquefaction capacity may also have contributed to the tighter vessel availability in recent days. Transit delays at the Panama canal, especially for those firms without pre-booked crossings, had lengthened total voyage times for firms delivering US cargoes via the passage to Asia, with last week vessels delayed by around 10-13 days, market participants said. That said, waiting times have since fallen to around 2-5 days, some added.

Increased liquefaction capacity may have also led to higher tonnage demand in recent weeks. The third 5mn t/yr Corpus Christi train was commissioned in late March, bringing total US liquefaction capacity to 80.1mn t/yr, up from 63.4mn t/yr in April last year. Output from the 15mn t/yr Corpus Christi project reached a record high last month of 1.25mn t of LNG, Vortexa data show, up from its previous high of 1.13mn t in January. That said, US export capacity was set to remain unchanged until the fourth quarter of this year, if the 10mn t/yr Calcasieu Pass facility starts operations as planned.

But vessel availability was also set to increase in the coming months, with a quick supply of newbuilds into the freight market over the second to third quarters. Around 17 vessels have been delivered or are expected to be delivered this quarter, with a further 12 vessels due in the third quarter.