40 LNG newbuildings in 2019, but market can cope, says Flex LNG

To date in 2019, some 20 LNG carriers and two FSRUs have been delivered, taking the global fleet of vessels over 125,000 m³ capacity – excluding FSRUs – to 502.

Some 106 conventional LNG carriers remain on the orderbook, and the John Fredriksen-owned company expects 20 more newbuilds will be delivered by the end of 2019, it revealed while announcing quarterly results.

However, the company said the newbuildings did not amount to an oversupply.

“Outlook for LNG shipping demand is compelling due to rapidly increasing demand for LNG. The market has absorbed new tonnage as it has arrived, and despite lower than expected tonne-mile growth due to muted US-Asia trade and limited arbitrage opportunities, we believe the market is reasonably balanced,” the Flex LNG report said.

Flex LNG chief executive Øystein M Kalleklev noted that earnings in the first half of the year had not been particularly good for the LNG industry – including for his own company, which posted a net loss of US$3.9M, an increase on the net losses posted in its previous quarter and the same quarter in 2018.

"The first half of 2019 has been a cold shower for most LNG industry participants with the exception of the end consumers, who have benefited from cheap clean fuel and made significant savings on their utility bills,” he said.

However, he said, demand outlook has improved for 2020 and 2021.

“Despite this challenging market environment, we do see improved outlook for the second half as the LNG shipping market is expected to become increasingly tight… and we expect the LNG product market to become increasingly tight from next year,” he said.

Tighter product markets generally result in higher shipping demand due to arbitrage and reloads, as Mr Kalleklev pointed out, an outcome that is likely to “positively affect the market balance in 2021," he said.