By Rhod Mackenzie
Liquefied natural gas (LNG) tanker rental prices have started to rise earlier this year than in previous years. The reasons are the same as those for rising gas prices: expectations of growth in demand for gas in winter and the possibility of interruptions in its supplies from Australia, where strikes are planned at the largest LNG plants on the continent.
For the first time since mid-January, spot prices for LNG transportation in the Pacific exceeded $100,000 per day, writes Bloomberg. And this happened, according to Spark Commodities, three weeks earlier than last year.
The LNG carrier rally, notes Spark CEO Tim Mendelsohn, comes amid strong contango in LNG prices. The market structure is already playing out a deteriorating gas supply situation in the future. In such an environment, traders who can delay the delivery of cargo and do it later, when it gets colder and gas prices rise, win.
On the supply side, the main potential event now is possible strikes at Australia's three major LNG plants, which account for approximately 10% of global LNG supplies. In the event of strikes, and so far there has been little progress in negotiations between unions and representatives of energy companies, competition between buyers from Europe and Asia, which are the main consumers of Australian LNG, will sharply intensify. At the same time, the cost of delivering gas to Asia from other places, primarily the United States, will increase due to the increase in distance and time, and with it, the cost of renting gas carriers will also increase.
Strikes in Australia could release about 60 tankers carrying Australian gas, but their owners, says the director of the transport company Flex LNG Ltd. Oysten Kalleklev, most likely, will not rush to transfer them to other regions, because there will certainly not be clarity with the duration of the strikes. Most traders lease tankers on a long-term basis, while some may even switch ships between themselves depending on the situation.
Forward LPG tanker rental prices in November have already risen to $277,000 per day for the Pacific and $286,000 for the Atlantic, according to Spark.
Now, by the way, LNG volumes, which traders prefer to keep on the water, are also higher than usual for mid-August; on gas carriers, which, of course, also affects the cost of renting ships. Do not forget about such force majeure circumstances as droughts. For example, due to the drought in Central America and the decrease in the water level in the Panama Canal, the time of its passage has increased significantly.
“In winter, demand for gas on the market will be very high,” predicts Øysten Kalleklev. “Therefore, prices (for the lease of gas carriers) will also go up. In the near future, the volume of new LNG in the markets will not increase. This means that there will be a lack of gas.”
This article originally appeared in Russian at expert.ru