LNG Shipping Shortage Behind Dramatic Hike in Atlantic Rates

Increased production of LNG in West Africa and the United States, and delays in discharges at Egyptian LNG terminals, has prompted a short squeeze on LNG shipping availability. Rates have increased dramatically over the past three weeks.

LNG freight was being offered at $170,000 per day on the follow in the London market on the morning of November 21. This represents a 150 percent rise in rates in comparison with the Atlantic $75,000 per day rate being quoted two weeks ago. The prices at the beginning of November were already about 50 percent higher than rates prevailing in August. At current levels, Atlantic freight rates are the highest they have been for two years, whilst Pacific rates have risen but not by the same margins. Inevitably, the longer the shortage of shipping lasts, the wider the effect on geographic rates will be.

Some LNG importers in the United States are delaying purchases in the hope that the spike in shipping rates will fall away. Others in Europe are likely to do the same, leading to the prospect that come the winter there will be a shortfall in supply, particularly if Ukraine is successful in further restricting Russian output and shipments.