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Ample vessel supply makes Drewry bearish on LNG rates

Written by Nick Blenkey
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Shresth Sharma, Drewry's lead LNG shipping analyst

APRIL 25, 2017 — Shipping consultancy Drewry believes that, given the mounting pressure on freight rates and continuing fleet growth over the next two years, excess LNG carrier supply will reduce only gradually with the recovery in rates pushed back to the latter part of next year.

In the latest edition of its LNG Forecaster report, Drewry maintains a bearish stance on the LNG shipping freight rate outlook for 2017 on account of strong fleet growth which is expected to be around 13%.

The movement in rates has so far been in line with Drewry’s expectations, as rates have been falling since the beginning of year.

The spot rate for dual-fuel diesel-electric (DFDE) vessels (East of Suez) is currently around $26,000 per day, compared to $37,000 per day in the beginning of the year, a fall of 30%.

“The tremendous weakness observed recently in the freight market highlights the ample vessel supply,” says Shresth Sharma, Drewry’s lead LNG shipping analyst. “We are anticipating two years of aggressive fleet growth with supply expected to expand a further 9% in 2018 which will extend the period of weak freight rate development into next year. Therefore, we do not expect rates to start recovering until the end of 2018 when several new LNG trains from the US are expected to be operating at full capacity. As a result, we have trimmed down our forecast for average spot freight rates in 2018 to $40,000/day from the earlier expectation of $50,000/day.”

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