Until recently, the LNG seaborne trade represented only eight per cent of the total gas trade and was limited to a few large importers such as Japan and South Korea. Oil-linked gas prices prevailed and almost all contracts were signed as long-term charters with very few ships involved in spot activities.
However, a substantial increase of gas production, combined with significant additions to both liquefaction and regasification capacity have changed the market fundamentals.
After years of stagnation, the seaborne trade grew by seven per cent, adding 17 million tonnes of new cargo. The demand growth was driven predominantly by China and India, but also by newcomers such as Pakistan, Egypt and Jordan. These countries will continue to drive demand, however other countries such as Thailand, Vietnam and Singapore are also expected to play an increasing role as importers.
“On the one hand, a growing number of importers are generating a steadily increasing demand while, on the other hand, forcing suppliers to demonstrate more flexibility,” DNV GL said.
According to IEA, more and more contracts are being signed for shorter durations and smaller quantities, without fixed destinations, and decoupled from oil prices. For the shipping industry this translates to more spot trading and more diversified trade patterns.
DNV Gl informed that it may still take a while for LNG carriers to experience higher earnings. The order book is still over 120 ships strong, with deliveries in 2017 and in 2018 set to reach an estimated growth of 10 per cent and 7 per cent, respectively.
“In light of the plans for major export terminal expansions in 2018 and 2019 (unless delayed), freight rates are likely to remain low throughout 2017. Nevertheless, the current remodelling of the market creates new opportunities in the longer perspective,” DNV GL said.