Shipping costs for liquefied natural gas (LNG) cargoes have tumbled to five-year lows as newly built carriers added to the global fleet outpace shipping demand and shorter average journey times have increased vessel availability.
Atlantic freight rates assessed for vessels with two-stroke engines capable of carrying 174,000 cubic meters of LNG, the most common type in the market, were at $4,250 per day on Tuesday, according to pricing agency Spark Commodities. Prices on Friday plunged to $3,500 a day, the lowest ever in Spark’s data which goes back five years.
The Atlantic rates are down 82% since the start of the year, and have dropped over 90% from the same time last year.
Rates for the same class of ship on Pacific routes have nearly halved so far this year, dropping to $11,000 a day on Tuesday, Spark’s data showed. That is lowest ever for its dataset and is down nearly 80% from last year.
“The global LNG fleet grew further in 2024, but global LNG loadings have only inched higher, leading to this oversupply of vessels as the market waits for a large increase in LNG export capacity over the next 18 months,” said Deng Xiaoyi, deputy head of global LNG freight pricing at Argus.
Deng added that charterers with extra shipping capacity at hand and shipowners are competing to let out their available vessels.
“Firms with extra shipping capacity have been willing to heavily reduce their offers rather than idling their vessels, to help them to partly recover their operational costs and cut their losses.”
For the older but still common vessel with tri-fuel diesel engines carrying 160,000 cubic meters of LNG, Atlantic rates were negative for the past week, hitting a record low of minus $2,750 a day on Monday before paring losses to reach minus $1,000 a day on Tuesday, said Spark Commodities analyst Qasim Afghan.
The only other time negative rates occurred was in February 2022, just before the Russian invasion of Ukraine, Afghan said, but only lasted for two days.
“Negative round-trip freight rates indicate that shipowner earnings don’t fully cover the fuel expenses associated with ballasting their vessel back to load port for a round-trip voyage in the Atlantic basin,” he said.
Market sources earlier forecast that LNG shipping rates could extend losses into 2025, when new tankers were added at a faster rate than LNG production was rising.
Higher delivered prices in Europe also incentivized U.S. cargoes to remain in the Atlantic versus travelling to Asia, increasing vessel availability as it results in shorter average journey times. At least six LNG cargoes were diverted from Asia to Europe in January.
Chinese tariffs on U.S. LNG and record amounts of newbuild vessels due to enter the market this year will compound this effect, said Spark’s Afghan, adding that freight rates could remain at current levels for the rest of the month.
“The U.S. arbitrage to Asia is currently assessed to remain closed for the rest of 2025… and would require a significant shift in the JKM-TTF spread for that market signal to shift to Asia,” he said, referring to the spread between Asia’s benchmark Japan-Korea-Marker price for LNG and European gas prices at the Dutch TTF hub.
On Tuesday, the TTF price was $15.76 per million British thermal units of gas versus $14.41 per MMBtu for the JKM.
(Reporting by Emily Chow in Singapore and Marwa Rashad in London; Editing by Christian Schmollinger)