LNG shipping outlook seen brighter after Q1 slump

Liquefied natural gas shipowner Gaslog Ltd predicts a buoyant year after a muted start as energy traders seek vessels early to avoid last winter’s tanker shortage.

Gaslog, which has 29 LNG carriers worldwide, is already fielding inquiries for multi-month charters as protection for next winter before heating demand – and prices – soar. The Bermuda-registered shipper reported first-quarter revenue on Friday that missed analysts’ estimates.

LNG prices and shipping rates surged to a four-year high in December as the pace of China’s anti-pollution drive and unprecedented demand for cleaner natural gas took traders by surprise. At the same time, declining natural gas production in Europe boosted its need for LNG shipments to cope with an abnormally cold winter.

“A trader told me that there were opportunities last winter to take cargoes out of Europe into Asia with great arbitrage possibilities,” Paul Wogan, chief executive officer of GasLog, said in a telephone interview. “They couldn’t take advantage of it because there were simply no ships available.”

Shipping rates have slumped from December’s peak in a “pronounced” slide exacerbated by outages at LNG plants such as in Papua New Guinea, a key supplier of the super-chilled fuel for Asia. The production halts cut the number of cargoes that could be transported, Wogan said.

“We are starting to see the market turn again,” Wogan said. “Our customers and the people supplying the LNG see the same trends that we do, and are hoping to be able to lock into charters now to guarantee that they can supply the product.”

Shipping rates are still above levels seen in the same period last year, and there are signs prices have reached a bottom, according to GasLog’s earnings statement. As summer approaches, demand for cooling in the northern hemisphere and for heating south of the equator will drive the shipping market in coming months, Wogan said.

While customers are seeking to sort their winter shipping requirements now, GasLog may benefit more from spot market rates at the height of the winter.

“From the shipowner’s point of view, we believe that this market will be strong in the winter,” he said. “We would rather take what we think is going to be a very strong spot rate through the coming summer and winter.”
Source: Bloomberg