Sufficient speculative LNG carrier newbuildings have been contracted to meet the expected needs of the market in 2022, according to Wells Fargo Securities analysts.
In the latest issue of their “Bottoms Up LNG” report, the Michael Webber-led team said the uncommitted portion of the LNG orderbook has been gradually building and now represents “an increasing risk” at 23% of the fleet.
The analysts estimated that between 120 and 135 vessels could be required to handle the incremental 72.2 million tonnes per annum of LNG that is expected to come onstream by 2022.
Bullish on chartering
They said this is nearly met already by the 119 vessels currently on order.
Despite its caution on additional newbuildings, Wells Fargo is bullish about the immediate LNG chartering environment. It believes spot rates and utilisation will pick up in the second half of 2019 and stay firm throughout next year.
One of the reasons the report cited is US Gulf exports continuing to soak up tonnage, which tightens market dynamics.
Inefficiencies in what the team described as “the emerging merchant LNG market” and “firmer Chinese volumes” support this, they added.
Subdued FSRU sector
“We expect a tighter second half ’19 LNG freight market,” they said. “We also expect new public entrants.”
Wells Fargo is less upbeat on the floating storage and regasification unit sector, which it sees as remaining “subdued”. The report said there are five uncommitted FSRUs in the current fleet and four trading in the charter market.
It forecast a slower-than-expected development for this business, with 2.4 projects per year getting the go-ahead — less than the three to four anticipated by the industry.
“Project and sovereign risks remain very high,” it said.