Canary in the coalmine
DEEP DIVE: An autopsy of LNG freight rates reveals a wider malaise facing the industry
Liquefied natural gas saved Europe in 2022. Now, the LNG industry needs to save itself.
LNG helped to bridge the yawning supply shortfall when Russia slashed pipeline exports before and after its land invasion of Ukraine. European LNG buyers hoovered up every spare cargo by bidding up prices and, in the process, gouging consumers.
The demand destruction that ensued is now manifest in several crucial indicators of industry health. One of these is the cost of chartering LNG ships.
For those not following this space closely, freight rates for cryogenic LNG vessels collapsed this year. The spectacular implosion went largely unreported outside of niche trade circles, and was generally dismissed as a rational market response to a wave of newbuild vessels entering service.
But there’s more to it than that. Much more — and it speaks volumes about the state of an industry that’s supposed to be on the cusp of unprecedented demand growth.
The cost of shipping is the ‘canary in the coalmine’ for the LNG industry. Plummeting rates signal softening demand, oversupply, and broader structural challenges facing the LNG sector as it struggles to maintain its position in the global energy mix.
This Deep Dive is an autopsy of LNG shipping in 2024.
It draws on a plethora of cargo, freight and LNG trade data from leading providers to break down the many factors crushing rates, what’s keeping them low, and what this tells us about the prospects for LNG in powering global economic growth.
Spoiler alert: it’s pretty ugly, and the data don’t lie.
ARTICLE STATS: 2,700 words, 12-min reading time, 13 original charts and graphs