London: One of the world’s experts on LNG shipping warns today short term rates for the sector will remain no better than they are today through to 2019.
Keith Bainbridge is the founder of UK consultancy CS LNG. His 20-plus year background in LNG shipping includes time at LNG Shipping Partners as well as becoming a partner at RS Platou.
Excess production with flexible FOB terms, mainly from the US and Australia, will certainly have a huge impact over the next three years, Bainbridge reckons. “Low gas market prices, excess volumes, low Asian demand and reduced ton-miles all add up to low charter rates,” he warns.
LNG shipping remains by and large fixed to long term charters. Those that have gone against this tradition in recent years have been burnt, Bainbridge says, especially in the wake of the 2011 Japanese nuclear explosion.
“Those owners that have ordered on a speculative basis post Fukushima in 2011 are all suffering badly,” Bainbridge says, noting how analysts have overlooked how in the four years post-Fukushima not one Japanese LNG owner ordered a single LNG ship that did not have a long term charter attached, yet the Europeans ran into the market on anticipated Asian growth. “Surely if Japan was in trouble the Japanese owners would have ordered,” Bainbridge comments. Not for nothing the CS in Bainbridge’s firm, CS LNG, stands for Common Sense.
In terms of what might make a good investment in today’s LNG shipping climate, Bainbridge tells Maritime CEO owners should think small.
“Investing in small scale and regas projects is the way forward,” Bainbridge says, adding: “The low hanging fruit from OECD countries has long since gone but there is a growing developing nations market that needs a new model, ie not large scale.”