Friday, November 1, 2013

Over the last few years, we've been witnessing more and more conventional ship owners venturing into the highly specialized and once niche market of LNG shipping. Solid growth demand prospects, coupled with a relatively small fleet and even smaller orderbook made good business sense. Today, for the most part, the rosy fundamentals haven't changed all that much, despite the significant rise in LNG newbuilding ordering.

According to the latest weekly report from shipbroker Intermodal, "a growing number of energy companies are adding to their production capacity as a result of the growing demand in Asia and although skeptics undermine the importance of such expansion, as the one China plans to undertake, this discussion is fast becoming significant amongst market pundits.

The shipbroker's SnP broker, George Dermatis noted that "the Chinese government has repeatedly encouraged – even pushed – its 3 large oil and gas companies to increase their respective LNG and LPG infrastructure spending. China's LNG production capacity in 2012 was 23.73million cbm per day. That would be equivalent to about 20.3billion cubic metres (bcm), or 14 percent of China's total gas demand last year of 147 billion cbm. Latest forecasts published in Bloomberg speak of expected gas consumption to drive up to 230 billion cbm by 2015! Prices have been rising due to shortage of supplies and lack of alternative supply infrastructure, especially during the winter months", he said.
"At present it seems that only few new routes can be added to ease the country's supply lifelines, despite significant efforts from the USA, where the government has already approved another four LNG projects – for SabinePass, Freeport, Lake Charles and Cove Point- targeted at supplying the Asian markets.

Only a few weeks back, Putin announced liberalisation plans for Russia's LNG in order to secure a vital part of this growing Asian demand and in doing so, underline Russia's importance as the world's biggest energy supplier in the region. This would be good news for Gazprom's competitors who would be able to take advantage of this rapidly growing market in order to catch up to Gazprom already overwhelming market share", Dermatis noted.

Concluding his argument, he mentioned that "as gas imports from Qatar, Australia, Indonesia and Malaysia rose by 20% y-o-y, the production potential of Central Asia, Russia, Africa, Canada and the States comes in centre stage as these countries will have to prepare themselves for China taking up 2nd place in world gas imports by 2025". So, as it turns out, the sheer size of the Asian behemoth, will once again prove to be the determining factor in one more market of shipping interest, besides the dry bulk and tanker ones.

In the newbuilding front this week, Intermodal noted that 'despite firm interest for new orders continuing to hold for yet another week, shipyards are still holding a reserved optimism for the future prospects, while continuing to squeeze the most out of this most recent opportunity, rather than making grand plans for capacity expansion. We have already seen shipbuilders purposely contain the number of slots they have available focusing on efficiency, as such, leaving the market with almost no slots with delivery within the next 12-18 months. At the same time there has been a constant and significant rise in the prices being quoted, especially for the more popular dry bulk vessel designs. It is interesting to note that we have seen a considerable price increase of between 5-11% amongst dry bulk slots over the past four months alone, while tankers have only noted a 1-4% rise during the same period. In terms of new orders, Greek owner Golden Union, was reported exercising options for two Capesize vessels (180,000dwt) at Hanjin in Philippines, for a price of $ 54.5m each and with delivery towards the end of 2015".
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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