's geopolitical turmoil in recent months has pushed the shipping market (especially the LNG sector) to once again become the focus of global attention. The potential massive demand growth in Asia, the global energy transition process and LNG export terminal projects have provided strong support for the future development of the LNG market. The uncertainty brought about by global geopolitics makes energy security issues receive attention again, which undoubtedly further increases the upward space of the LNG market. It is expected that the LNG shipping market will enter a significant growth stage.

Trade growth is gaining momentum.

Although the growth rate may be uneven over the years, the global LNG trade as a whole has maintained a good growth trend. In the past 20 years, the global LNG seaborne trade volume has increased by an average of 6.5%, compared with the average growth of 3.4% in pipeline natural gas trade over the same period, the average growth rate of global natural gas demand is 2.4%, and the global oil seaborne trade volume has only increased by 1.0%.

Although the latest forecast of Clarkson Research shows that the trade growth rate will slow slightly this year and next (5% in 2022 and 4% in 2023, mainly due to the limited new capacity of LNG export projects this year and next), the future growth of LNG trade volume is still optimistic. In the medium to long term, it is mainly supported by two factors:

1. LNG export project capacity will usher in large-scale expansion in 2024-2025. Clarkson's research database shows that 0.155 billion tons/year liquefaction capacity projects are currently under construction, 0.303 billion tons/year projects are in FEED stage, and 0.295 billion tons/year projects have been proposed.

2. LNG trade prospects will also benefit from the global energy transition process (at least in the initial stage). In the energy transition model studied by Clarkson, LNG trade will experience more rapid growth in the next 10 years under the rapid decarbonization scenario in line with the Paris Agreement.

Energy Security Fuels

At the beginning of 2022, the global natural gas market was already experiencing severe fluctuations and price shocks due to a series of factors. The geopolitical impact of the Russian-Ukrainian conflict (Russia's natural gas production accounts for 17% of the world's total) further exacerbated the market's turmoil, including trade and charter markets.

• In terms of trade, although this situation has led to increased global inflation and macroeconomic risks, due to geopolitical factors and energy security being quickly paid attention to, the initial impact of LNG trade shows that European LNG imports have increased by 52% year-on-year since the beginning of the year.

-In the charter market, considering that most of the increase in European imports comes from the transfer of Asian goods, which has reduced the transportation distance of tons to a certain extent, the recent continued strong level of LNG charter is more supported by the uncertainty of sanctions and the expectation of future transportation demand growth (Freeport LNG shutdown will disturb the market in the short term). As of June 17, the one-year charter rent of 160,000 cubic meters of TFDE LNG ships released by Clarkson Research is US $100,000/day, and the overall prospect of LNG charter market is still strong. In addition, the expectation of increased trade demand also brings opportunities to the FSRU market. Since this year, Europe has signed eight FSRU leases.

in terms of long-term impact, Clarkson's preliminary assessment of the impact of the Russian-Ukrainian conflict on the shipping market assumes that most of the Russian-European pipeline natural gas trade (0.12 billion tons in 2021) will be phased out, and the global LNG trade volume forecast will reach 0.62 billion tons in 2030 (up 40 million tons). Clarkson's research believes that under ideal conditions, LNG will replace all pipeline natural gas exported from Russia to Europe, and the growth of LNG trade in Asia will not be affected. The global LNG trade volume may increase from the current 0.401 billion tons to 0.695 billion tons, which will bring about 110 LNG ships. Capacity demand.

Fleet renewal investment accelerates

At present, Clarkson Research Database records that the fleet size of LNG (LNG ships above 40,000 cubic meters) has reached 632, totaling 0.1033 billion cubic meters. About 30% of the fleet still uses steam turbines and may face greater uncertainty about the impact of emission policies such as EEXI, CII and methane escape on the shipping industry.

Clarkson Research Database records that the total amount of hand-held orders for LNG ships in the world accounts for 36% of the fleet's capacity, of which 86 new orders (with a total value of about US $15.6 billion) were signed in 2021. In the first half of this year, it has set a half-year record of more than 80 new orders. With the price of new ships rising by 20%, the new ship investment of US $16.7 billion for LNG ships this year (as of June 17) has exceeded the annual level. Although some of the new orders were brought about by the Qatar 100-ship project proposed in 2020.

Long-term tracking metrics

Overall, the LNG market will continue to show rapid expansion, and Clarkson Research will still closely track demand and supply uncertainties.

First of all, there are still uncertainties in energy transformation and energy security, and there may be a warning voice in the market that "LNG export projects will be postponed and a large number of new ships will still be delivered on time. Many other factors of uncertainty on the demand side cannot be ignored, including the potential containment of repeated outbreaks in China, the global economic slowdown, the impact of prices on demand, the evolution of conflicts and related political levels, potential policy changes in China on coal and pipeline gas, and the timing of shore infrastructure construction. (For trade demand, please see Clarkson Research LNG Monthly Update Report)

In addition to the fleet supply side, environmental regulations, technology changes face further changes, Clarkson research monthly update green environmental analysis. With some Chinese shipyards entering the new shipbuilding field of LNG ships, the annual production capacity of LNG ships of Chinese shipyards will be expanded to more than 20 ships in the near future. However, it is worth noting that even with the expansion of production capacity, Clarkson's new shipbuilding data show that the new LNG dock period for shipyards around the world has been scheduled to 2025 or even 2026. (For investment supply, please see Clarkson Research New Shipbuilding Report)

Source: Shipping