Kilo Petrochem

The freight of liquefied natural gas (hereinafter referred to as "LNG") carriers is still soaring.

According to the latest data from the Baltic Exchange, the daily rent of LNG carriers in the spot market has reached the highest level of 450000 US dollars/day, up six times from the beginning of this year. Data shows that last year, the cost of renting a LNG carrier was about 30000 US dollars/day to 300000 US dollars/day. However, since the conflict between Russia and Ukraine, this number has been rising, constantly breaking new historical highs.

Lin Boqiang, president of the China Energy Policy Research Institute of Xiamen University, said in an interview with the China Economic Times that the current surge in LNG carrier freight has a lot to do with the Beixi pipeline accident. When the pipeline transportation is blocked, only shipping can be carried out. Due to the imbalance between supply and demand, LNG carrier fees will inevitably rise, which is expected.

"Behind the soaring LNG shipping costs is the deepening imbalance of the global energy supply side and the short-term accumulation of European energy crisis risks." Chen Jia, a researcher at the International Monetary Institute of Renmin University of China, told our reporter.

With the outbreak of the Russian Ukrainian conflict, EU countries accelerated the "replenishment" globally in order to replace the imported natural gas from Russia, making the supply of LNG carriers, the means of marine transportation of natural gas, short of demand, and the freight soaring.

In Chen Jia's view, the huge arbitrage space of LNG international trade is a factor that cannot be ignored in the soaring LNG shipping costs. Recently, the price difference between the international LNG market transaction price and the US local transaction price has soared from 6-8 times to 10 times, even soaring, which directly triggered a massive influx of global excess LNG production capacity, including North America and Asia, to energy scarce regions represented by Europe.

"Recently, the explosion of Beixi Pipeline has had a great impact on European countries. Due to the huge energy demand in Europe, the high freight rate of LNG carriers may have to continue for some time, because it will take a long time to build a new pipeline." Lin Boqiang said.

With the high landscape of the LNG transport market, the LNG carrier market is also gradually warming up, and the order quantity and price of LNG carriers are rising. According to the statistics of Clarkson, as of the beginning of October, the global order of LNG carriers has reached 128 this year, which is the highest level since statistics. From 2018 to 2021, the global turnover of new LNG carriers will be 77, 60, 53 and 86 respectively.

As we all know, LNG carrier is internationally recognized as a ship with high added value and high technology content, and is often praised as the pearl in the crown of shipbuilding industry. In the international shipbuilding industry competition, LNG carriers are also considered as the symbol of high-end ship type market competitiveness.

In previous years, due to the limited overall market demand, China's LNG carrier orders were relatively limited. According to VesselsValue data, in 2018, Chinese shipyards won 10 orders for LNG carriers, with a total order value of US $563 million. However, since they were all small and medium-sized LNG carriers at that time, the average single ship value was only US $56 million. This year, this situation has changed. In the first three quarters of this year, from the perspective of order value, the order value of China's LNG transport ships accounted for 20% of the world's share, the highest proportion in the past five years.

"The long-term imbalance between supply and demand and the expectation of sharp rise and fall in short-term demand have further exacerbated the bottleneck of LNG transport capacity, resulting in its freight rate fluctuating with the wave of bulk trading." Chen Jia said.