Atlantic LNG: TFDE rates slip on the week

Spot charter rates for tri-fuel diesel electric (TFDE) vessels slipped on Friday from the previous week but remained higher than a year earlier, with a number of enquiries in recent days and as the inter-basin arbitrage reopening could lift tonnage demand.

Charter rates for spot fixtures west of Suez were assessed at $91,500/d on Friday, unchanged on the day but down from $94,250/d a week earlier. Spot fixtures east of Suez also fell to $83,000/d from $87,000/d. Rates in the Atlantic basin held their premium to those in the Pacific, where vessel availability remained higher. There had been some interest for west African loadings in mid-late January as well as requirements for US commissioning cargoes, which may have contributed to keep charter rates in the Atlantic firm, market participants said.

The inter-basin des price differential widening in recent days could also result in higher tonnage demand. The Dutch TTF February market stood 90¢/mn Btu below the Argus northeast Asia des (ANEA) March price on Friday, out from 60¢/mn Btu a week earlier. But the differential may be too tight to encourage significant volumes of uncommitted US LNG loaded in February to head towards northeast Asia, as it was narrower than the additional shipping costs of around $1.20/mn Btu to send a cargo from the US to northeast Asia instead of northwest Europe, based on prevailing charter rates.

India may attract some US volumes, with fresh demand for prompt cargoes emerging in the south Asian country this week. That said, shipping a US cargo to India would incur additional costs comparable to delivering the same cargo to northeast Asia. And US Gulf Coast facilities exported only around two cargoes per month to Indian import terminals in 2019, with most delivered under long-term contracts.

A tighter inter-basin differential for loadings further along the curve may have weighed on forward freight rates, with the curve holding in backwardation until around June-July in recent weeks. The TTF March contract was at only a 51¢/mn Btu discount to the ANEA April price on Friday.

The backwardation in northeast Asian and European delivered prices could have also have contributed to the backwardation in forward rates, as firms have little incentive to delay deliveries which could keep vessel availability ample.

West of Suez forward freight rates for March were assessed at $78,500/d, while spot rates had already dropped below $60,000/d by early February last year.

And rates for this summer were assessed as low as $64,000/d for July, but they were expected to recover to $120,000/d by November.

Ongoing US liquefaction capacity expansion may support rates by tying up vessels in longer voyages in the coming months, supporting charter rates on the spot market, but this may dissipate as new tankers enter the market from the middle of this year, market participants said. Shipowner Teekay LNG Partners sees 50 new LNG carriers entering service this year, increasing to 55 in 2021.