Baku, Azerbaijan, Oct.2
By Leman Zeynalova – Trend:
Liquefied natural gas (LNG) shipping costs will increase, driven up by rising charter rates, higher fuel costs and the growth in inter-basin trade flows, according to the estimations of Fitch Solutions Macro Research (a unit of Fitch Group).
“From 2019 the increase in tanker capacity looks set to lag the growth in demand. Industry projections show a mounting capacity deficit over the next five years, with a global deficit in LNG carriers (LNGCs) in the range of 50 -60 vessels forecast for 2022,” said the report obtained by Trend.
The shipping sector is highly cyclical and a structural deficit and accompanying rise in charter rates will incentivise investment in newbuild capacity, according to the company.
“Due to the relatively long lead times involved (typically ranging from two to five years ), this capacity will not hit the market until the early-to-mid 2020s. In the interim, charter rates will roam higher, as demand increasingly outstrips supply,” said the report.
Fitch Solutions believes that in addition to rising charter rates, higher fuel prices and inter-basin trade growth will combine to drive shipping costs higher, over the coming years.
“The type and amount of fuel demanded depends on the type of LNG carriers used. Older, steam turbine (ST) vessels are less efficient, have higher LNG boil off rates and are more reliant on liquid fuels. Adding to generally higher oil prices, the implementation of the International Maritime Organisation's (IMO's ) new sulpur cap in 2020 will further inflate shipping costs,” said the report.
LNG tankers which currently rely on high-sulphur fuel oil (HSFO) will have to switch to low-sulphur fuel oil (LSFO) or gas oil (GO) in order to comply with the new regulations, Fitch Solutions believes.
Another factor influencing shipping costs will be the change in trade flows, according to the report.
“With demand growth heavily concentrated in Asia-Pacific and supply growth shifting to North America, we forecast growing regional imbalances in the global LNG market. Our data indicate that Asia-Pacific will contribute over two thirds of global demand growth over the next five years, but provide little more than 10 percent of the growth in supply. An increasing number of cargoes will have to be pulled from the Atlantic to Pacific bas in, in order to offset this imbalance,” said the company.
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