Skip to main content

Drewry: LNG shipping set for tough time

Published by
LNG Industry,

According to Drewry’s ‘LNG Shipping Market Annual Review and Forecast’ report, continuing weak demand and excess tonnage are expected to depress LNG shipping earnings in the near term. However, longer term the sector could face vessel shortages as ordering slows and liquefaction projects come on stream.

Presently, the LNG shipping market faces tough times. The fleet continues to grow even though its trade has declined and LNG supply has stagnated. The global LNG trade fell for the second consecutive year in 2013 by 1%, as many liquefaction sites faced unplanned shutdowns, which resulted in tight supplies and higher prices.

Japanese imports rose just 1% in 2013 and are expected to stagnate as the country looks to restart its mothballed nuclear power plants, in the face of rising fossil fuel import costs and a depreciating currency. Imports to Europe declined 23% due to lower demand and increased reliance on piped gas. Likewise, imports by the US and Canada fell 45% and 42%, respectively, due to surplus natural gas production. Meanwhile, insignificant additions to global liquefaction capacity and unplanned shutdowns led to a tight LNG supply during the year.

Global LNG imports. Source: Drewry’s LNG Shipping Market Annual Review and Forecast 2014.

Despite weak demand, LNG vessel capacity rose 5% in the 18 months to June 2014 to 56 million m3. Drewry is forecasting that fleet growth will accelerate at an annual rate of 8% both this year and next to reach 66 million m3 by the end of 2015.

Drewry’s Lead Gas Shipping Analyst, Shantanu Bhushan, said: “A deadly combination of expanding vessel fleet, limited cargo availability and falling trade caused short-term freight rates for conventional LNG carriers to decline through 2013 and the first half of 2014 […] Although there are plans to add 64 billion m3 per annum of liquefaction capacity during 2014-15, major concerns for shipowners are the timely completion of these projects, the possible restart of Japanese nuclear power plants and the fast rising vessel fleet. As a result, the outlook for unchartered vessels over the next 18 months is not favourable and we expect spot and short-term freight rates to remain under pressure.”

Drewry’s short-term freight index and Far East trade index. Source: Drewry’s LNG Shipping Market Annual Review and Forecast 2014.

However, demand is expected to recover strongly in the latter part of the decade as new production comes on stream, on completion of various projects under construction in Australia and North America.

Bhushan added: “Drewry cautions shipowners that the anticipated rise in cargo traffic may take them by surprise. We expect that the LNG shipping industry will need many more vessels in the latter half of the decade than are currently on order.”

The ‘LNG Shipping Annual Review & Forecast’ is published annually by Drewry Maritime Research. The report will be available here.

Adapted from press release by

Read the article online at:


Embed article link: (copy the HTML code below):