LNG shipping rate dynamics are under intense pressure as geopolitical risks around the Strait of Hormuz drive a sudden surge in LNG charter costs.
The shipping paradox: while the closure of Strait of Hormuz could reduce global LNG shipments by nearly 20%, spot LNG charter rates surged by 600% since last Friday to around $300 000/day in the Atlantic Basin, their highest level since the 2022 gas crisis.
So what is driving this steep increase in spot charter rates?
(1) Longer shipping routes: it will take longer to bring LNG to the key Asian markets from alternative sources such as the US;
(2) Short-term repositioning: the JKM-TTF premium widened to near $5/mmbtu, incentivising LNG cargo diversions from Europe to Asia, which also results in longer shipping routes.
(3) Higher spot gas prices incentivised stronger competition for the limited number of spot LNG carriers and hence is driving up their daily charter rates;
It should be also noted, that the full impact on the shipping market is not felt yet: many LNG carriers which departed from Qatar and the UAE are still in route to their respective destination markets. So in way, they are still “at work”.
The question is what happens if there is a more prolonged disruption and the number of laden vessels starts to increase… What is your view? How will the LNG shipping market evolve?
Source: Greg MOLNAR
