LNG tanker freight rates rise to 10-year high

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 percent on a year ago, according to Clarksons Platou Securities, Report informs referring to Financial Times.

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 50 billion cubic meters of LNG.

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. As the capacity crunch worsens, the success of LNG traders this winter will hinge on securing enough ships to maximize profits from high prices.

In recent years shipping bottlenecks have hindered the delivery of LNG to consuming markets in Asia and Europe. 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.

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. Older vessels have fallen out of favor because they use turbine engines powered by the boil-off vapor from the LNG - essentially using their cargo as fuel.

According to the Gas Infrastructure Europe Association, which represents the interests of European gas infrastructure operators, LNG receipts from terminals into the European gas transmission system in May were record high for this month - 10.8 billion cubic meters. This is more than the previous record high of 10.27 billion cubic meters, observed in May 2020. EU LNG stocks are now 13% higher than in 2021 and 12% higher than the five-year average.