“The Market Has Exploded”: LNG Charter Rates Soar As Traders Rush To Secure Tankers

Zubu Brothers ^ | 6-6-2022

[blam]

Last week we showed that while US natural gas prices have had several catalysts that have propelled them higher in recent weeks, one of the biggest drivers why natural gas is trading at the highest level in over a decade, was the recent surge in LNG exports to Europe as Reuters’ energy expert John Kemp explained in detail.

But while the surge in oil exports is bad news for US consumers, it’s fantastic news for LNG tankers because as the FT reports, the world’s largest gas traders are scrambling to secure liquefied natural gas tankers ahead of winter after the sanctions on Russia triggered a reshaping of global energy flows.

While there is traditionally a pick up in demand as winter approaches, LNG shipowners and brokers say an unusually early annual rush is under way for the likes of the UK’s Shell, France’s TotalEnergies and China’s Unipec to secure enough shipping capacity to transport the superchilled fuel during the peak winter demand season. As a result, rates to charter an LNG tanker for a year are trading near their highest level in a decade at $120,000 per day, up more than 50% on a year ago, according to Clarksons Platou Securities.

The market boom comes after the EU vowed to reduce its dependence on Russian gas by two-thirds by the end of the year and import an extra 50bn cubic meters of LNG as an offset (although key European markets such as Germany don’t even have an LNG terminal and won’t have one ready for years).

Shipowners say Total has been particularly active in shopping for LNG carriers to rent for between three and five years, a longer period than usual. Total said it did not comment on market rumours.

“The market has exploded. It’s very hard to find any ships with length [of availability] in the market. It’s going through the roof,” said Oystein Kalleklev, head of Flex LNG and Avance Gas, two LNG shipping groups.

And as the capacity crunch worsens, the success of LNG traders this winter – and the ability of vast swaths of Europe to avoid freezing – will depend on securing enough ships to maximize profits from high prices: “We have cargoes we can’t find ships for,” said one shipbroker.

As the FT explains, in recent years shipping bottlenecks have hindered the delivery of LNG to consuming markets in Asia and Europe, and it has only gotten worse in the past years. Indeed, the rush for ships usually takes place in late summer in the northern hemisphere but this year it has already kicked off and traders are seeking to lower rates by agreeing to longer rental periods, according to industry executives.

And if the war in Ukraine wasn’t bad enough, there is also the insanity that is ESG: the scramble to secure LNG vessels comes ahead of new global shipping emission regulations next year, potentially decreasing supply further, and as East Asian shipyards struggle to launch new LNG carriers quickly enough.

Brokers say the higher-value cargo resulting from the rise in gas prices has pushed up demand for modern vessels, as older vessels have fallen out of favor because they use turbine engines powered by the boil-off vapour from the LNG — essentially using their cargo as fuel.

“It’s getting quite complex to get the right ships for the cargoes,” said another shipbroker, referring to trading companies’ demands for the larger modern ships.

Karl Fredrik Staubo, CEO of Golar LNG, an LNG shipping company, said traders were realizing there was “less availability than we previously thought” after a flurry of activity by big trading houses. Golar LNG this week leased a floating storage and regasification unit — a special subset of LNG vessels used as import terminals — to Italian gas grid operator Snam for $350mn. Staubo said limited availability of FSRUs meant conversions of LNG carriers would be needed to meet the surge in European demand for regasification, adding to pressure on the LNG shipping market.

[blam]

They're talking about shipping costs in this article but the higher natural gas prices will be reflected in your heating and cooling bills.

I'm a bit anxious about my cooling bills this summer.

I can't imagine what the Europeans will pay for heating this winter. Especially with all the starving 'migrants' they are expected to have coming.

Italy’s Salvini Warns Food Shortages Could Cause 20 Million African Migrants To Enter Europe

[JonPreston]

As long as Putin suffers, America’s political class is ok with you feeling pain.

[HighSierra5]

I’m so glad the LNG market is doing well while I’m getting screwed.

[blam]

"I’m so glad the LNG market is doing well while I’m getting screwed."

$40 billion is just a drop in the bucket for what American households will pay.

Better get ready!

[The Louiswu]

[BipolarBob]

Putin suffer? China will gladly buy all excess food and gas. WE suffer. I still think this stupid war has to do with money kickbacks, the same as the scamdemic.

[alloysteel]

“Let the bastards freeze in the dark” - wasn’t there an energy crisis like this once before? Seems to me that this quote came from Ted Kennedy, when natural gas was getting shuttled around through government interference, making artificial shortages.

[Eagles6]

My electric bill just jumped 23%, after being steady for at least 4 years.

[Robert DeLong]

I believe it has been said over the ages, in various iterations of that quote, going back to the days of Will Rogers. I see references of Canada saying it as well.

DUCKDUCKGO results page for: "Let the bastards freeze in the dark" quote

[Tell It Right]

"My electric bill just jumped 23%, after being steady for at least 4 years."

My electric bill rose a lot when Obama forced my power utility to spend a billion shutting down a coal plant and replacing it with a natural gas plant. Then Brandon lowers the supply of natural gas, which raised both my natural gas bill and my power bill (because the power bill includes an energy rider to pass on to consumers the high energy costs the power company has to pay).

That was the last straw for me.

[Eagles6]

The planned destruction of the middle class and the Republic continues apace.

[woodbutcher1963]

This is causing a ripple effect across all sources of energy.

You chose to install the solar array. Many will do likewise.
I hear commercials everyday on certain radio stations.

People will install wood stoves and pellet stoves.
People that already have them, like ME, will use them more this coming winter than they ever have before.
This will cause an increase in the price of both cord wood and pellets.

Eversource(the biggest electric utility) in New England will run their only remaining COAL fired plant in NH again. They were only running it during peak demand the last few years because it was cheaper to make electricity with natural gas.

People will also choose to add more insulation to their homes because the ROI will be much quicker as the price of energy goes up.

[Tell It Right]

If you don’t mind my asking, how do you get fuel for your pellet stoves and wood stoves? Do you have lots of wooded land and chop the wood yourself?

[woodbutcher1963]

I have a Harman pellet stove insert. I buy bagged pellets at Home Depot or Lowes. The pellet stove retailers also sell it by the bag or pallet/ton delivered to your house.
I have had it nine years. I would only buy a Harman pellet stove. They are the best IMHO. I can explain why if you are serious about purchasing.

The first couple years I would buy three tons of pellets delivered to my house in September or October. If you can put them directly into your garage attached to your house this is a good option. I had to handle them twice that way. Now, I buy up to 24 bags at a time. Loading them into the back of my pickup and right into a space in the garage. The first couple years there were shortages of pellets. Now, there are so many manufactures and so many different
companies that sell them.

I just buy them throughout the heating season. I have four bags left in the garage right now. I also have another wood burning fireplace, but only use that on special occasions. I have 12 acres and generate about a cord of firewood every year off of my own property just from trees/limbs that fall/break or trees that die, etc. I split it up and sell the balance one PU load at a time on the local FB page. $100 cash delivered today. I can usually sell them within 15 minutes. Especially in the fall.

A full seasoned cord(128 cu ft)of hardwood now goes for $350 cut, split and delivered to your house. I had a Jutul wood stove at my former house. I burned hardwood cord wood for 17 years. I would burn about a cord/year. I would buy it green and let it sit for a couple years before I burned it. I also scrounged it locally whenever there was an ice storm, etc. Burning a wood stove is a lot of work. Plus it creates a lot of ash. You need to sweep the chimney because of creosote build up. Plus bringing in the wood always makes a mess.

Pellets are a lot easier, cleaner, no creosote and I clean the stove once a week. Pull it out of the fireplace and do a thorough cleaning once a year in October. The stove I have is not cheap. I believe they are now about $7K installed. This is for the model installed in a masonry fireplace. Free standing models are cheaper. Plus they can be directly vented through an exterior wall. They have a power vent fan system built into the stove.

[1Old Pro]

I have a Harman pellet stove insert.

Yep, 4 tons delivered early October and stored the the garage. The stove is effectively used in November thru March. In the coldest upstate NY months I keep in on from 6pm to 7am so the furnace doesn't come on at night and burn the ultra expensive LP gas used for the boiler.

[woodbutcher1963]

This is what I have in my masonry fireplace:

https://www.harmanstoves.com/products/accentra52i-tc-pellet-insert

I have it with the enameled finish. In the winter I burn about a bag(40 lbs) of pellets/day. Fill it one in the morning and before I go to bed. It runs on a thermostat.

[Tell It Right]

Thanks for the info. I have no desire for a pellet stove. I live in Alabama where our cold weather isn't too bad. And my solar system will power my all electric house, including heating at night, about 70% of the time in the winter after I finish my upgrade. I'll buy about 30% of my power from the grid in the worst months for solar (but often somewhat least demanding in power needs too). Over the year I anticipate buying about 10% of my power from the grid, and that includes charging an EV I have on order to drive it ~200 miles per week.

I'm just curious as how my fellow freedom loving Americans are handling energy sources. Has there been any talk by the Dims of treating wood or pellet heating as an evil energy source that needs to be limited like they do fossil fuels? They've done that with natural gas, which not too long ago was considered a clean alternative to coal. And the Dims can't make up their feeble minds if they love or hate nuclear energy. One thing attractive about my solar system is the Dims would have to work really hard to get between me and the sun. I can understand people trying to create most of their energy on their own if they can, be it from solar or a pico-hydro turbine or a small wind turbine or a combination.

[woodbutcher1963]

Actually the Dems/Libs think burning pellets is a good thing. There is currently a 26% federal tax credit on the model I sent you.
Burning wood/cellulose is a “carbon neutral” thingy(technical term). That is also why the plants up here in NH that burn wood waste are still running even though at one point natural gas was a lot cheaper.

I think the only restrictions on burning wood are in places like Salt Lake City where they are surrounded by mountains. They and Boise get inversions in the winter.

Pellet stoves are a great retrofit for existing homes in the northern half of the country. My house was built in 1972. It originally had electric radiant heat because it was built during the oil embargo. In the 1980s, one of the previous owners installed a forced hot water oil burner furnace. I installed the pellet stove the year Obama got the price of oil up to $150/barrel.

I have a question for you. When you did your research on your solar system did you ever consider one of those arrays that tracks the sun throughout the day?
I have enough property to put up a freestanding system. I wondered how much more expensive the tracker arrays were in comparison to a static system ?

[kiryandil]

I hope our local electric contract holds through the coming winter, because it may be cheaper to heat with space heaters than natural gas.

[Tell It Right]

I considered a solar tracking system. But I went against it with the idea being that moving parts = increased chance of breakdown. I instead went with more solar panels. Particularly with my panels being on the roof of a 2-story house (hard to access if needed maintenance). This is even more true if you're looking at a horizontal system that moves during the day (facing more east in the morning and slowly moving to facing west in the afternoon). Not so much if you're talking about a vertical system (moving not daily, but annually to point higher up during summer months, then at a lower angle during winter months when the sun is closer to the horizon than during the summer).

If you're talking about vertical tracking (adjustments just twice or 4 times per year) and if it's free standing where you can casually walk to it and work on it if it needs repairs, you've got my attention. But if you're talking about horizontal tracking every day, you might be be better off using that extra cost to increase your # of panels and maybe having a curved shaped array. (Maybe 20% facing south-southeast, the middle 60% facing due south, and 20% facing south-southwest).

One nice thing about you being in NH is your solar array will be angled lower towards the horizon than mine are in AL. This is because in the winter your sun during noon is at a lower angle in the sky than it is for me. Yeah, that means you don't get as much sun in NH as I do in AL. But a nice side-effect of that is when it rains it washes dust/pollen off the panels better because they're at a steep angle. So you have to wash your panels less frequently. It also means when they get covered in snow, when the snow melts it'll run off the panels faster and, supposedly, cleans the panels better naturally.

When you don't have snow, one nice thing about northern cold weather is the panels produce more when they're cold. I've seen my 10.2kW of panels produce a hair over 11kW in the few times it gets about 30F degrees in Alabama and I didn't have frost on the panels. Solar panels are the only thing I can think of where their stated throughput can be exceeded. (Their official throughput is at more normal temps like 70F, but they produce better when they're colder than that.)