Surplus of LNG Ships May Reduce Vessel Orders, Clarksons Says

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Jul 2009

Shipyards including Samsung Heavy Industries Co. and Hyundai Heavy Industries Co. may see orders drying up for liquefied natural gas tankers because of a surplus of ships and low demand, a shipbroker said.  There may be no new orders for LNG vessels in the next couple of years, said Keith Bainbridge, managing director of the LNG division at London-based Clarksons Plc, the world’s largest ship broker. LNG tanker rentals in the spot market are still at about half of what charterers paid in winter 2007, according to Bainbridge & Drewry Maritime Services Ltd.  “There’s just no demand for ships no matter what the price,” he said on the sidelines of the Commercializing Floating LNG Asia conference, organized by IQPC Ltd. Yards may have to cut prices for a typical LNG tanker to about $180 million compared with $250 million prior to the global financial crisis for new orders, he estimated.
Projects in Yemen, Qatar, Norway, Russia and Indonesia have been delayed while existing ventures are accelerating maintenance as Japan and South Korea, the world’s biggest LNG buyers, cut volumes, Bainbridge said. Prices of LNG have fallen from more than $20 per million British thermal units last year to less than $5 now, according to Asian nations’ import data.  LNG spot charter rates are at $35,000 to $40,000 a day as surplus tankers chase fixtures, said Bainbridge, who spent 15 years at sea with BP Plc’s shipping division. Charterers may have paid as much as $75,000 a day during winter 2007, according to Drewry Maritime Services Ltd.
Scrapping Vessels  LNG tankers older than 25 years may be scrapped or converted to floating production platforms next year to ease the surplus, Bainbridge said. There are 67 vessels on order, while the current LNG fleet size is 324, he said in a presentation.
As many as 80 ships, accounting for about 65 percent of the surplus, are waiting for projects to commence, Kenneth Wilson, an independent LNG shipping consultant, said in Singapore in April.  Shipyards may deliver 6 million deadweight tons of capacity in the next few years, Merrill Lynch & Co. said in a report dated April 7. The recent expansion brought the total LNG fleet capacity to 23 million in March, it said. Deadweight tons is a measure of a ship’s capacity to carry cargo, fuel and water.
LNG is natural gas that has been reduced to one-six- hundredth of its original volume at minus 161 degrees Celsius (minus 259 Fahrenheit) for transportation by ship to destinations not connected by pipeline. On arrival, it is turned back into gas for distribution to power plants, factories and households.

Source: Bloomberg