Extreme temperatures and plant outages in the Pacific basin have pushed Asian spot LNG prices upward, creating more competition in the market and boosting spot shipping rates.
The average daily spot rate for liquefied natural gas tankers to Asia and Europe have narrowed as summer activity has heated up. That competition has led to prices for the largest LNG vessels headed to Europe taking the price premium from Asia, according to Spark Commodities data.
Spark Commodities analyst Qasim Afghan told NGI Atlantic freight rates increased significantly between late May and early July, more than doubling in that period from $43,500/day to $89,500/day by the beginning of the month. During the same period, Asian rates rose around $8,000/day, creating a spread between both basins of $37,250/day.
“This is the largest basin spread since winter 2022, and the largest spread in the last five years outside of winter periods,” Afghan said.
Freeport LNG Development LP was forced to shut down following former Hurricane Beryl’s arrival on the Texas coast earlier in the month, canceling around 10 LNG cargoes. As a result, Afghan noted, Atlantic rates decreased by $13,250/day to near $76,250/day.
Pacific rates have also ticked up by 56% since the beginning of the month to around $71,500/day as freight demand in the Pacific has increased in response to extreme heat.
“As such, the basin spread has now narrowed to $4,750/day, which is much more comparable with basin spreads seen at similar times in previous years," Afghan said.
The Dutch Title Transfer Facility contract for August has hovered above the $10.5/MMBtu mark since mid-July, helping to push Asian spot prices above $12.
As shipments from Freeport LNG restarted last week, Asian prices began to dip, but have seemingly found a floor around $12 with Indian buyers entering the market.
Indian Oil Corp. reportedly bought two cargoes for August/September delivery, and other Indian buyers have been looking to purchase up to eight spot cargoes for delivery over the next three months.
[Check out a Special Edition of NGI's Daily Gas Price Index, 'Ports Unknown,' to delve into the price impacts of new LNG supplies, and where those supplies will be needed most later this decade and beyond. Download now.]
European demand has also been reinforced by the Freeport outages and concerns about Atlantic supply, according to Poten & Partners’ Jason Feer, global head of business intelligence.
“On a spot basis, there was a significant shift at the end of last week, with Asia spot price rising 30-38%, depending on the size and quality of the vessel,” Feer said. “At the same time, European spot rates fell 15-18% week/week. Europe is still significantly higher, but the gap closed quite a bit.”
The main reason for this shift, according to Feer, was that vessel availability in the Atlantic is expected to be fairly stable over the next few months. Pacific vessel availability would drop off considerably in more than two months, which has been supporting spot rates. If the trend continues, that would support Asia spot rates.
Much of the Asian buying is due to price sensitive customers getting back into the market, Feer noted. “With a significant increase in Indian buying, and an uptick in China, prices are still relatively expensive on a historic basis, but buyers have become used to higher prices and current levels are better than they were a year or two ago.”
Feer said the season fixing for winter has been happening earlier than in the past. “I would expect to see rates rising fairly soon as importers start to lock in freight for the coming winter,” Feer said.
