Robust global LNG trade propels tonne-mile growth

Increasing trade in LNG has led to a healthy growth in tonne miles, which are expected to rise by 11.5% in 2019 and 12.3% in 2020, according to UK-based maritime research analysts Clarksons Research.

The data is among the key findings in LNG Trade & Transport, Clarksons Research’s annual review of the LNG shipping markets.

“Recent export growth has been dominated by Australia and the US, while China has driven import growth”, said Clarksons Research managing director Steve Gordon. Chinese imports increased by 38% in 2018 to reach 54 tonnes, accounting for 60% of global expansion. “Our soon to be released China LNG in 2030 suggests imports could reach 186 tonnes by the end of next decade” said Mr Gordon.

“With 93 mta of export capacity under construction, and a further 313 mta of capacity at FEED, growth potential remains strong.”

Mr Gordon explained that the trade expansion, combined with high day rates for vessels trading on the short-term market over the past 12 months, has supported newbuilding orders totalling US$17Bn since start 2018 and helped build a newbuilding orderbook of 25% of the fleet.

A record 77 LNG carriers (68 >40,000 m³) of $12.7Bn were ordered in 2018, almost 90% of which were contracted at South Korean yards.

By June 2019, the LNG carrier orderbook stood at 141 ships with an aggregate capacity of 21.1M m³ and $24.5Bn, equivalent to 25% of fleet capacity, with 40% of capacity on order owned by Greek shipowners, according to Clarksons Research.

Mr Gordon added, “Our long-term modelling now suggests that the LNG fleet will outnumber the VLCC fleet by 2026. We also see growing interest in small-scale LNG, floating storage and regasification units (FSRUs), floating LNG and, increasingly, LNG as a marine fuel”.

LNG carrier fleet capacity grew by 11% during 2018 (June 2019: fleet totals 570 vessels/85.0M m³) and we forecast growth of 5.6% and 6.9% in 2019/2020.

Over the last 10 years, the number of LNG bilateral trading routes have more than trebled, continuing diversification of LNG trade, with 317 bilateral trading routes in 2018, up from 98 in 2008.

Recent export growth has been dominated by Australia, accounting for 44% of export growth, and the US accounting for 33%. Australia is forecast to overtake Qatar as the world’s largest LNG exporter in 2020.

Strong gains in charter rates across 2018 impacting about 20% of the fleet on the spot market, with spot rates for a 160,000-m³ dual-fuel, diesel-electric vessel averaging US$88,692/day, up 93% year-on-year. There has been a slight softening of rates in H1 2019 although supply/demand fundamentals in 2019-20 look supportive.

FSRUs account for 12% of current regasification capacity and 24% of export capacity under construction.

LNG as a fuel

Clarksons Research also reports that interest in alternative fuels is beginning to gain traction. LNG fuel-capable adoption stands at about 3% of the world fleet and about 16% of the world orderbook by tonnage. “We estimate that 3% to 4% of world tonnage will be LNG fuel-capable through 2020,” said Mr Gordon, “albeit the majority is still in LNG carrier sector. LNG infrastructure is also ramping up, with number of ports globally with LNG bunkering increased from about 20 to 100 in past five years”.