US Gulf Coast LNG freights to NWE, Asia drop amid bearish fundamentals

15 Jan 2024 spglobal.com

Highlights

US LNG freight rates hit multi-month lows

Spot vessels remains ample despite drop

Author Aly Blakeway Editor Jonathan Loades-Carter

Freight rates to ship LNG from the US Gulf Coast region to both Northwest Europe and Asia have dropped to multi-month lows as high inventories and relatively bearish sentiment across the globe weigh on shipping and trading activity.

Platts, part of S&P Global Commodity Insights, assessed the US Gulf Coast to Northwest Europe LNG freight cost at 99 cents/MMBtu on Jan. 12, down 2 cents/MMBtu on the day and 6 cents/MMBtu on the week.

On the same day, the LNG USGC to Japan/Korea freight cost via Panama was assessed at $2.15/MMBtu, down 6 cents/MMBtu on the day and 13 cents/MMBtu on the week. The freights to Japan/South Korea via the Cape of Good Hope and the Suez Canal were assessed at $3.10/MMBtu and $3.17/MMBtu respectively.

This put the three freight rates to Japan/Korea at the lowest levels seen since July 31, while the freight to NWE was at the lowest level since Aug. 2.

Despite the number of available spot vessels in the Pacific falling so far in January, as several requirements appear throughout February, shipping sources still suggest there is ample vessel availability which should help to soften freights. Although buying interest picked up slightly in Asia due to the lower prices, the bearish fundamentals are persisting as inventories remain well-stocked in the region.

The number of available spot vessels was flat throughout January in the Atlantic Ocean, but comfortable stocks and a continued high import trend have been working in tandem with low demand to keep flat prices and freight rate increases at bay.

Recessionary pressures across Europe, as well as the weaker economic signals in both Europe and China should weigh on sentiment further. While colder temperatures were being seen in parts of Europe, with Aggregated Gas Storage Inventory recording European gas storages at 79.72% as of Jan. 13, sources expect little impact in the near term.

Alternate routes

The ongoing security situation in the Red Sea has pressured the shipping industry, with many buyers and sellers looking to take alternative routes as a result. Many market participants have chosen to sail via the Cape of Good Hope as a result.

Despite the Red Sea tensions, the market remains comfortably stocked and, with an abundance of available spot vessels, it should be able to absorb the additional costs from the longer routes.

Of the total 3.66 million mt of US LNG exports in 2024 so far, 380,000 mt of LNG were being transited around the Cape of Good Hope while 280,000 mt were being sent through the Panama Canal. The route for the remaining US exports was not yet specified.

In 2023, US exports via the Panama Canal fell by nearly 9% year on year, but rose 260% and 44% for volumes shipped via the Cape of Good Hope and Suez Canal respectively.