LNG ships drift in a sea of red ink

{"text":[[{"start":7.73,"text":"It is a rum old business when you cannot cover your costs. "},{"start":11.097000000000001,"text":"Just ask the owners of vessels ferrying liquefied natural gas across the seas. "},{"start":15.489,"text":"Spot charter rates in the Atlantic have plummeted more than 90 per cent since November to $4,000 a day, causing them to spring a leak. "}],[{"start":23.72,"text":"An expected boom in LNG — driven by Europe’s pivot away from Russian gas and gung-ho US projects — has unleashed a flurry of shipbuilding. "},{"start":31.999,"text":"Yet the global supply of the liquid fuel grew just 2.5 per cent last year, a fraction of typical annual average growth in recent years. "},{"start":39.592,"text":"The extra 10bn cubic metres was less than one-third of the extra seaborne capacity. "}],[{"start":45,"text":"The resulting losses are painful for ship operators, but not permanent. "},{"start":49.292,"text":"Manufacturing ships is an up-and-down game. "},{"start":52.009,"text":"Vessels take time to build; just not quite so long, it transpires, as it takes to get LNG plants online. "}],[{"start":59.88,"text":"Messy politics, insurgencies and funding uncertainty add to the practicalities of building plants in the US, Africa and elsewhere; France’s TotalEnergies last month announced further delays to its $20bn project in Mozambique, launched in 2020. "}],[{"start":75.18,"text":"Worse, price differentials between the European and Asian markets have made it more profitable for the US, the biggest exporter, to ship LNG to Europe rather than Asia. "},{"start":84.659,"text":"That is a shorter trip, meaning still greater availability of ship hours. "},{"start":88.82700000000001,"text":"China’s retaliatory sanctions on US LNG may — at the margin — further curtail the average length of trips. "}],[{"start":null,"text":"

"}],[{"start":96.31,"text":"For plenty of ship owners, this is water off a duck’s back: charter rates are set in advance and only a minority are struck at the spot rate. "},{"start":103.927,"text":"Besides, they know it is a question of when, not if, the cycle turns. "},{"start":108.59400000000001,"text":"Expect an improvement in the imbalance this year rather than a complete reversal. "}],[{"start":113.6,"text":"Yes, LNG supply will grow; the International Energy Agency is forecasting 5 per cent in 2025. "},{"start":120.692,"text":"Europe, which is under regulatory orders to fill 90 per cent of gas storage facilities by November this year, needs to stock up. "},{"start":127.734,"text":"As of now, levels are running at about 53 per cent. "}],[{"start":132.20999999999998,"text":"All that should be sufficient to nudge rates up from the seabed, even given increased shipping capacity and lacklustre growth from China. "},{"start":139.12699999999998,"text":"The world’s biggest LNG buyer is having a relatively mild winter and its slower economic growth does not tally with a big jump in energy consumption. "}],[{"start":147.2,"text":"Further ahead, weather permitting, the outlook improves further. "},{"start":151.167,"text":"Shell of the UK is reckoning on a 50 per cent increase in LNG demand from 2023 to 2040. "},{"start":157.209,"text":"More projects should be coming online. "},{"start":159.50199999999998,"text":"Once again, traders will be griping about the cost of delivery. "}],[{"start":163.12,"text":""}]],"url":"https://creatives.ftmailbox.cn/album/191427-1738712873.mp3"}