LNG Ship Rents May Rise to 8-Year High as Japan Cargoes Expand

The cost of hiring ships to haul liquefied natural gas may exceed $100,000 a day for the first time since 2003 as Japanese demand for the fuel expands, according to Arctic Securities ASA.


Rental rates for charters lasting up to one year will average $110,000 daily next year and $125,000 in 2013, said Erik Nikolai Stavseth, an analyst at Arctic in Oslo. Golar LNG Ltd., led by Norway-born billionaire John Fredriksen, is seeking $125,000 a day for its new vessels, Stavseth said by phone yesterday. Stena Bulk aims to rent out the Stena Crystal Sky for more than $100,000, Senior Vice President Kim Ullman said.
“We have a great chance we can do that,” Ullman said by phone yesterday from Gothenburg, Sweden, where Stena Bulk is based. It’s seeking a charter rate five times higher than those for similar “short-term” bookings 13 months ago, he said.
Rental rates are climbing because Japan’s LNG demand strengthened after March’s earthquake and tsunami caused nuclear power plants to close, Lorentzen & Stemoco AS said in a June 22 report. Qatar struggled to find enough vessels to haul its exports of the fuel, the Oslo-based shipbroker said. Most of the tankers are hired under multiyear contracts, it said.
“There’s not much to pick up or choose from now,” Knut Stangbye Olsen, a shipping analyst with Lorentzen & Stemoco, said by phone. “It’s a completely different market from the first half of 2010.”
20-Year Contracts
Charter costs for LNG carriers last topped $100,000 between 2000 and 2003, Arctic’s Stavseth said. About 75 percent of the vessels ply dedicated trading routes under contracts lasting 20 years or more, according to Lorentzen & Stemoco.
Golar LNG Chief Executive Officer Tor Olav Troim discussed expected returns at a forum in New York last week, Stavseth said. Chief Financial Officer Graham Robjohns declined to comment when contacted by phone on June 24.
The daily hire cost for an LNG tanker with a capacity of 145,000 cubic meters (5.1 million cubic feet) exceeded $90,000, HSBC Shipping Services Ltd. said in a report e-mailed June 24. That compares with $20,000 in the first half of 2010, it said.
Qatar, the world’s biggest LNG producer, exported a record 997,000 metric tons of the fuel to Japan in April, according to Bloomberg data supplied by New York energy consultancy Poten & Partners. That made the Asian nation the largest consumer of the Middle East country’s gas.
Demand for Gas
Natural-gas usage may rise more than 50 percent by 2035 from last year, overtaking coal as the second-most-used fuel, the International Energy Agency said June 6. LNG trade was about 300 billion cubic meters in 2010 and will increase by 80 billion cubic meters by 2015, according to Lorentzen & Stemoco.
The forecasts have prompted vessel owners to sign contracts for more than 20 new ships in the last three months, swelling the number on order at shipyards to 47, the shipbroker said. The new vessels were ordered “speculatively,” meaning no contracts have been signed with LNG producers to hire the ships, according to the report.
Stena Crystal Sky is one of three LNG carriers purchased by Stena Bulk in May for $700 million and will be ready for service as of the middle of July, according to Ullman. The ship can carry 174,000 cubic meters of the fuel.
Golar LNG said April 12 it had contracted with Samsung Heavy Industries Co. to build four LNG carriers for $800 million, with an option for four more vessels. The shipper said in the following week it acquired contracts with Samsung to build two more of the vessels, costing $400 million.
Source: Bloomberg