Shipping Costs for Liquefied Natural Gas Expected to Rise

Liquefied natural gas shipping costs will increase, driven by rising charter rates, higher fuel costs and the growth in interbasin trade flows, according to estimations by Fitch Solutions Macro Research.

“From 2019, the increase in tanker capacity looks set to lag the growth in demand. Industry projections show a mounting capacity deficit over the next five years, with a global deficit in LNG carriers in the range of 50 to 60 vessels forecast for 2022,” the report obtained by Trend said.

The shipping sector is highly cyclical, and a structural deficit and accompanying rise in charter rates will incentivize investment in newbuild capacity, according to the company.

“Due to the relatively long lead times involved [typically ranging from two to five years ], this capacity will not hit the market until the early to mid-2020s. In the interim, charter rates will roam higher as demand increasingly outstrips supply,” the report said.

Fitch Solutions says that besides rising charter rates, higher fuel prices and interbasin trade growth will combine to drive shipping costs higher over the coming years.

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