LNG portfolios turn to one year time-charters to mitigate growing volatility

Missing Freeport LNG supplies are starting to cool the spot shipping rates but LNG charterers are still seeking options to mitigate hikes in volatility and liquidity challenges for the coming winter.

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Extreme volatility and high prices seen in the last year are changing the playing field for LNG trading in numerous ways.

Global LNG flows are being reshuffled, with Europe challenging the dominance of Asian importers by hiking its year-to-date imports by 60% versus the same period last year.

With this change, security of supply has been restored as the central principle for most buyers.

Traditional 20-year agreements are back on the table, providing ripe conditions for new project developments.

At the same time, the LNG shipping market is shifting, as charterers are facing a hike in volatility as well, leading to a partial disconnect between spot markets and fundamentals as liquidity dries up.

Like the buyers, charterers are seeking options to reduce exposure to the spot market.

More players are opting for multi-year time-charters in their fleet to cover for winter stresses on the shipping demand.

Evidently, LNG time-charter rates are up across all vessel types and the spot market has already risen well before peak winter demand.

Source: Felix Booth, Head of LNG, Vortexa

See the complete article on the Vortexa website