LNG freight rates in the Atlantic and Pacific basins have continued to fall as tri-fuel diesel-electric charters have lost their edge, with a charterer saying they have “no advantage” over two-strokes.
Platts, part of S&P Global Commodity Insights, assessed the LNG Atlantic carrier day rate at $1,500/d Feb. 6, a 62.5% decrease from the previous week. On Jan. 30, rates were assessed at $4,000/d.
A surge in newbuilds has led to an oversupply of LNG carriers. This excess capacity has intensified competition among shipowners, driving down rates.
The current lack of activity has caused rates to approach a theoretical negative. If a shipowner accepts a TFDE charter, the owner will incur losses because operational costs exceed the charter rate.
While the current lack of activity has driven rates to a theoretical negative, it is unlikely that the actual charter price for a TFDE would reach zero. Shipowners are unwilling to accept terms that would result in giving their charters away, as doing so would lead to significant financial losses. Therefore, any negotiated rates would still reflect the necessity for owners to cover their operational costs.
“I guess they will be negative if two strokes are $5,000/d,” a charterer said. “… They have more boil-off, no reliquefication, and gas is not cheap. There is no advantage of TFDEs over two-strokes.”
In 2024, the average LNG Atlantic carrier day rate was $40,689/d. The year witnessed a significant downturn, eventually culminating in a final rate assessed by Platts at $15,000/d Dec. 31.
Rates have consistently declined since the start of the year. On Jan. 17, rates were at $15,000/d. They then dropped by $9,000/d Jan. 24, when Platts assessed them at $6,000/d.
The accumulation of charters has intensified due to the limited availability of cargo, particularly in the East, resulting in many charters remaining uncontracted. Also, fuel and delivery costs for the ships are high, so buyers should generally expect a higher price to account for factors like reliquefication.
“If you don’t believe you will secure employment for the vessel, it becomes expensive to fuel the ship,” a shipbroker said. “There are usually environmental issues and costs associated with burning fuels to keep the ship cool. Overall, you should expect a higher price to maintain the ship’s temperature, manage reliquefication and address boil-off.”
The Pacific Basin has also seen a significant downturn since the start of the year. Platts assessed LNG Asia Pacific carrier day rates at $6,000/d Feb. 6.
Platts assessed LNG Atlantic two-stroke carriers at $4,500/d Feb. 6, a $3,000 decrease from the previous week.
In the Pacific Basin, Platts assessed two-stroke carriers at $11,000/d Feb. 6, a $2,000 decrease from the previous week.
In 2024, the average LNG Atlantic two-stroke rate was $53,979/d. As with TDFEs, the year witnessed a significant downturn, culminating in a final rate assessed by Platts at $23,000/d Dec. 31.
This year, two-strokes have been falling much more slowly than TFDEs. This is mainly due to the activity and the still-present need for two-strokes, the opposite of TFDEs, which have been outcasts in the market.
Source: Platts
