Clarkson Research: "Peak Season" for LNG shipping market not strong, market to continue under pressure next year.

On November 29, Clarkson Research published an article stating that the spot market daily earnings of LNG carriers in 2024 were at historically low levels, with an average of $57,457 per day for 17.4 million cubic meters two-stroke dual-fuel LNG carriers since the beginning of the year, a 53% decrease compared to the same period last year. Clarkson Research believes that the LNG carrier market will continue to face pressure in 2025. Fleet capacity will further increase by 11%, and due to delayed production of export projects, LNG export capacity will only enter an expansion phase in the second half of next year. In addition, capacity growth is expected to remain strong in 2026, resulting in continued oversupply pressure in the short term. Clarkson Research points out that this year the LNG carrier market has seen a "delivery wave," with global fleet capacity increasing significantly by 6.2% from January to November; however, with limited trade growth support, it is expected that the annual trade volume will only increase by 1.3%. This has led to some "project ships" being put into operation before the start of export projects, making the market supply side more relaxed, with charter rates hitting historic lows. Although the market is entering its peak season, LNG carriers' spot market daily earnings have sharply declined in recent weeks. By late November, the average daily earnings for 17.4 million cubic meters two-stroke dual-fuel LNG carriers dropped to $20,250 per day, over 90% lower than the historical average; during the same period, the earnings for 14.5 million cubic meters steam turbine LNG carriers fell below $10,000 per day for the first time to only $6,750 per day. Besides strong fleet growth and limited trade volume growth this year, other market factors have also contributed to the decline in earnings. Although winter is approaching and natural gas consumption in Europe is increasing, inventories remain at around 90% of high levels. The interest of "traders" in spot ships has waned, and the market has seen an increase in capacity supply. Recently, the price spread between European and Asian natural gas has narrowed, reducing arbitrage opportunities, with some US Gulf exports of LNG heading to Europe and reducing long-distance transport between regions. In addition, due to fluctuations in TTF prices, the number of LNG carriers used for floating storage has decreased, further increasing available capacity, with at most 25 vessels expected to be used for floating gas storage. Looking ahead, the LNG carrier market faces both negative and positive factors. In the short term, if extreme low temperatures occur in the coming weeks, driving demand for LNG carriers, spot market daily earnings may see seasonal improvements, but considering the pressure on the supply side, the increase is expected to be more limited than in previous years. Current Clarkson Research believes that the LNG carrier market will continue to be under pressure in 2025. Fleet capacity is expected to increase by 11%, while the expansion of LNG export capacity will not occur until the second half of next year due to delays in export project production. Furthermore, capacity growth is predicted to remain strong in 2026, leading to continued oversupply pressure in the short term. However, with the accelerated production progress of the Plaquemines (13 million tons/year) and LNG Canada (14 million tons/year) projects, the market demand for capacity is expected to improve by 2026. Looking back at 2024, the spot market daily earnings of LNG carriers have remained low since the beginning of the year, recently hitting a historical new low. Due to the "mismatch of supply and demand," earnings are expected to remain under pressure in the short term. However, as export projects come online in the coming years, Clarkson Research expects global LNG trade volume to increase significantly to 660 million tons by 2030, a 62% increase from 2023, and with a large number of older vessels in the fleet (still 229 steam turbine LNG carriers), there is a significant potential for dismantling, leading to a positive medium-term outlook.