According to industry insiders, the spot charter rates for liquefied natural gas transportation vessels have risen to the highest level in eight months, with freight rates on both the Atlantic China Welding Consumables,Inc. and The Pacific routes seeing a surge; the global liquefied natural gas freight increase is mainly due to tight vessel supply, but the situation in the Middle East has further intensified market concerns; changes in U.S. liquefied natural gas supplies and a large number of obsolete vessels being scrapped have led to a sharp reduction in capacity as traders rush to purchase liquefied natural gas transportation vessels.
According to Caixin, on June 24 (editor: Ma Lan), due to the Middle East conflict and a surge in demand for shipping services, the spot charter rates for liquefied natural gas transportation vessels have risen to the highest level in eight months.
According to the pricing agency Spark Commodities, on Monday, the charter fee for mainstream vessels transporting liquefied natural gas on the Atlantic China Welding Consumables,Inc. route reached $51,750 per day, the highest level since October 3 of last year. These LNG ships typically can load 0.174 million cubic meters of liquefied natural gas.
The agency also pointed out that the freight rates for Pacific routes of vessels of the same class have also seen an increase, currently reaching $36,750 per day, the highest level since October 25 of last year.
Spark Commodities Analyst Qasim Afghan stated to the media that the global increase in liquefied natural gas freight rates is mainly due to tight vessel supply, which is related to changes in U.S. liquefied natural gas supply. The developments in the Middle East have further intensified market concerns, leading to a rapid rise in freight rates.
Multiple factors.
Although the concentration of new ship deliveries in 2024 had once pressed freight rates to lower levels, the scrapping rate of old vessels being slightly higher than expected, combined with traders rushing to purchase liquefied natural gas transportation vessels, has led to a sharp reduction in capacity in the short term.
On the other hand, the U.S. Freeport liquefied natural gas export terminal restart plan has intensified the competition for capacity on the Atlantic China Welding Consumables,Inc. route. Previously, Europe had to import liquefied natural gas from other countries due to sanctions against Russia, and the U.S. is one of the important exporting countries. The increase in Europe-U.S. and U.S.-Europe routes has always been a crucial factor supporting Atlantic capacity.
In addition, the demand for liquefied natural gas imports in Emerging Markets in Asia continues to grow, with data showing that the proportion of long-term shipping contracts has exceeded 60%.
Strong demand is the underlying support for the busy liquefied natural gas shipping sector, while geopolitical factors are the catalysts for price increases. Due to the conflict between Iran and Israel, more shipowners have had to detour around the Cape of Good Hope to avoid war risks, leading to increased operating costs due to longer voyages.
In addition, some have pointed out that frequent pirate activities in the Southeast Asian waters have also prompted shipowners to invest more in security, further driving up the daily operating costs of vessels.
In addition to operating costs, the war risk insurance premiums for ships are also increasing. It is reported that Qatar, as one of the world's largest liquefied natural gas exporters, has seen ship war insurance premiums at its Ras Laffan port significantly rise over the weekend, with the cost of a single ship docking up 40% since the beginning of the year.
Moreover, sources have indicated that since the outbreak of the Iran-Israel conflict, war insurance premiums have skyrocketed to five times their original rates.
