05 December 2023
The year 2022 saw an ordering spree for LNG carriers. All this, in the middle of spiking demand for LNG driven primarily by the ongoing geopolitical turbulence in Europe as the EU battles to break away from dependence on Russian gas instigated by Russia’s war in Ukraine.
LNG values have continued to strengthen, spurred by skyrocketing earnings that have surpassed last year’s record-breaking peaks. In November 2022, LNG rates peaked at a record high of 466,524 USD/Day from the Baltic Exchange BLNG1g assessment, pushing up LNG values.
Demand for LNG carriers has increased exponentially this year due to the energy crisis in Europe. As a result, the EU is attempting to reduce its reliance on Russian gas, following the conflict with Ukraine. Demand for seaborne LNG imports has surged as Russia steadily cuts gas flows from pipelines. Hence, forcing many counties in Europe to turn to floating storage units.
Values for LNG carriers have surged across the board. Fixed age values for five-year-old Large LNG carriers (174,000 CBM) are currently at an all-time high. Particularly, LNG value is at USD 207.91 mil, up c.26% from USD 164,67 mil in January 2022.
LNG values received a boost in November 2022 as earnings skyrocket once again, surpassing last year’s record-breaking levels and rates. Rates peaked at 165,709 USD/day in mid-November. High demand for LNG vessels is visible due to the energy requirements that are untouchable. Specifically, resulting from the conflict between Ukraine and Russia. This, combined with low fleet supply, has sent freight rates soaring.
As a result, LNG values have continued on their upward trajectory. New building prices for large LNG carriers of 174,000 CBM, up c.26% year on year to USD 256.46 mil. The number of new building orders placed is up c.78% from last year at 162 orders. Some of the main market participants have been MOL, NYK Line, Global Meridian, and Knutsen OAS. They have been ordering up to 20 vessels each so far this year.
Notable new building orders this month include an en-bloc order from Seapeak for five Large LNG carriers (174,000 CBM). Construction scheduled to take place at Samsung and delivered in 2027, contracted for USD 215.46 mil each.
MOL added some further orders to their growing new building list for three more Large LNG Carriers (174,000 CBM). These vessels are scheduled to be built at Hudong Zhonghua and slated for delivery in 2027, bringing their total of new building orders placed this year to 19.
Demand for LNG has been firm over the course of the last year. Considering that the world, particularly Europe, attempts to reduce its reliance on sanctioned Russian LNG. This has increased tone mile for LNG vessels with gas sourced from further afield. With a number of LNG carriers tied up in floating storage as a means to secure energy supply for the northern hemisphere winter. This has reduced vessel availability, pushing up rates even further last month.
At the moment, volumes of LNG in floating storage have wound down to a third of the levels seen in November. However, with weather forecasts predicting a colder than usual December, there is talk of a second spike in winter LNG rates in the coming weeks.
Corinth Pipeworks will fabricate and supply the piping for the Alexandroupolis FSRU natural gas pipeline by Gastrade. Hence, connecting to the National Natural Gas Transmission System of Greece and transmitting to Northeastern Europe.
Japan is the largest importer of LNG globally, followed by China and South Korea. In the current energy crisis situation, importers are looking further ahead to secure energy in the coming years and therefore, with cleaner energy sources at the forefront, demand is soaring for LNG and therefore LNG carriers.
MOL is the world’s largest owner of LNG Carriers, with a fleet of 38 vessels and a value of USD 6.2 bn.
Over the course of 2022, MOL has placed 19 new building orders for LNG vessels, this is the second largest number of orders by an individual company, NYK ranked first with 20 new building orders.
All of the orders in MOL are for Large LNG carriers of 174,000 CBM. The majority constructed at Hudong Zhonghua in China with three also on order at Daewoo, South Korea. Scheduled for delivery between 2024 and 2028.
LNG freight rate levels have been stratospheric this year, bringing up values for the entire fleet and this has also sparked an ordering spree across the LNG sector and a total of 162 new orders have been placed so far this year, compared to 99 orders placed in 2021, an increase of c.63% year on year. The value of LNG new building orders placed so far this year is USD 33,742.89 mil, an increase of c.87% from USD 18,076.25 mil.
Of these orders, just over a quarter were placed by Japanese companies including MOL, NYJ, and Meiji Shipping, with 44 contracts inked. Out of the top ship-owning nations, Japan owns the highest value fleet for LNG vessels at USD 30.3 bn. South Korea ranked second with 28 orders placed this year, followed by Greece with 21 orders.
Notable new contracts include an en bloc order for two Large LNG carriers of 175,000 CBM from China Merchants, scheduled to be built at Dalian and delivered in 2026 for USD 235 mil each, VV value USD 240.79 mil.
VesselsValue data as of the end of November 2022.
South Korean shipbuilders had led the industry but are facing growing challenges and recently slipped back into second place for new orders.