22 September 2018, News Wires — The price of shipping liquefied natural gas (LNG) has spiked in September and is likely to remain high next year, buoyed by rising production from new plants and concerns that demand for LNG vessels will outpace supply.
The rate for vessels shipping LNG from the Atlantic Basin to Asia has jumped to $90,000 to $95,000 a day this week from $75,000 a day at the end of August, brokers and traders said.
Rates, which broadly hovered around $30,000 to $40,000 a day from 2015 to 2017, have risen due to longer distances covered to transport LNG from new terminals in the United States and Arctic Russia, surging demand in China and a limited number of ships.
Rates have hit “the highest levels since the last bull market of 2012 … elevating the starting point for another anticipated winter market rally and the next cyclical upturn,” said Jonathan Chappell, analyst with Evercore ISI.
Shipping firms see little sign of them slipping soon, predicting high rates for 2019 or longer, during their earnings calls this month.
Hoegh LNG Chief Executive Sveinung Stohle told investors and analysts he expected rates to “increase on the levels where they are, certainly, for the next two to three years”.
Strong LNG demand has helped drive the shipping rate rise. Japanese and South Korean utilities having been stocking up on LNG for winter, driving prices to a seasonal four-year high. Demand was stronger than usual after a summer heatwave meant reserves were drawn down to power extra air-conditioning.
Despite this week’s pause, Asian buyers are expected to return as the northern hemisphere winter sets in.
This increasing demand for LNG has compounded already rising shipping rates, partly driven by the ramping up of exports at Novatek’s Yamal LNG terminal and at U.S. LNG terminals.