LNG shipping markets have experienced a much deeper downturn than expected but analysts predict a bounce back in 2026/27.

Don’t expect the LNG sector to resume its bull run over the next 12 months but, despite sustained fleet growth over the balance of the decade, LNG ocean trade is likely to stage a significant recovery from 2026/7 onwards.  

At an LNG shipping webinar yesterday, 29 Jan ‘25 Drewry analysts addressed the questions: Where are we? How did we get here and where do we go now? Senior Research Analyst, Gas Shipping, Pratiksha Negi, set the scene. The downturn had been much faster and deeper than expected, she said, resulting in a highly imbalanced market which is likely to remain tight this year.

Although LNG demand has climbed in Asia and South America over the last 12 months, it has fallen in Europe, partly due to high inventories and strong renewable energy production. Consumption has remained low, keeping imports in check. However, European gas demand is likely to recover this year, Pratiksha predicted, and Asia will stay strong. The research firm believes that LNG prices are likely to ease this year, settling at around $14-15 per MMbtu. While President Trump’s inauguration has generated disquiet in some spheres of geopolitics with significant implications for shipping, the LNG sector is not one of them. In fact, Trump’s second presidency will boost the global LNG business, according to the Drewry analysis...Drewry predicts that the end of hostilities in the Red Sea looks set to have a marked impact on global LNG trades. While the Cape of Good Hope is likely to remain the preferred route for US exports to Asia, Qatari exports to Europe, down more than 40% since 2022, are likely to climb again via Suez. Algerian exports to Asia through the Red Sea will also increase, having fallen sharply in 2024. However, against this improving backdrop, there will be an influx of new ships, 83 units this year, 10% of the existing fleet, and 88 vessels in 2026. There are currently 330 LNG carriers on order but Drewry notes that currently high newbuilding prices, which could ease, may discourage more newbuilding contracts in the short term...Drewry notes a number of steamers coming off charter with no re-employment opportunities in sight. Vessel idling and lay-ups are rising and more demolition is expected. In the short run, more steam turbine ships are likely to head to Asia. It should be noted that three Japanese partners – NYK Line, Namura Shipbuilding, and Sasebo Heavy Industries – were granted Approval in Principle late in 2023 for engine conversions of steam turbine units to low-speed, dual-fuel X-DF diesels. Steamers may also make appealing FSRU conversion candidates.

On fleet utilisation, Drewry expects a figure of around 80% this year to climb steadily to over 95% by 2029. M-type electronically control gas engine (MEGI) carriers will appeal most with typical spot rates climbing from around $50,000 this year to more than $120,000 by the end of the decade. Tri-fuel diesel-electric (TFDE) vessels are likely to earn average rates of just over $40,000 this year, doubling to around $80,000 by 2030, Drewry predicts.