Demand for LNG Carriers on the Rise
Wood Mackenzie has issued a report outlining future LNG carrier demand based on realistic criteria (excluding weather-related navigation disruptions). According to their analysis:
- Over 560 new LNG carriers will be additionally needed by 2032 to transport an additional 200 million tonnes of LNG supply.
- Long-haul exports from new U.S. LNG projects significantly increase vessel requirements.
Based on GIIGNL’s projections, over 1,391 LNG vessels will be operational globally by 2032.
Comparison with Dry Bulk Market
The LNG fleet size is beginning to resemble mature dry bulk sectors like Capesize (for iron ore) and Ultramax (multi-cargo carriers). LNG’s position between European and Asian demand centers gives Qatar a geographic advantage—allowing them to optimize fleet size more efficiently than the U.S.
Existing and Projected Vessel Demand
- Ongoing construction projects alone require 350+ vessels.
- Pre-FID (Final Investment Decision) projects could push demand to an additional 210 ships by 2032.
Key Exporters and Regional Needs
Among the big three exporters—U.S., Qatar, and Australia—vessel demand varies depending on import regions. Qatar, located between Europe and Asia, maintains a moderate vessel count due to shorter travel times compared to the U.S.
Risk and Uncertainty
LNG Price Outlook:
- Expected to fall below $10/MMBTU by 2028.
- Over 200 million tonnes of additional supply to hit markets after 2031.
- If supply outpaces demand, prices may fall further.
Implications:
- Lower prices drive Asian demand, boosting long-haul shipping activity.
- However, prices below $6/MMBTU may undermine marginal project economics, leading to temporary production halts and increased vessel availability, potentially lowering charter rates.
Role of Asian Markets in LNG Shipping Demand
1. China
- Uncontracted demand post-2026 creates opportunities for spot or mid-term contracts.
- Trade tensions may redirect U.S. cargoes toward Middle East or Africa, impacting U.S.-Asia shipping routes.
- Chinese buyers may increasingly sign contracts with non-U.S. suppliers.
2. Northeast Asia (Japan, Korea)
- From 2025, legacy contracts expire rapidly.
- Buyers seek FOB-based contracts and diversion rights for flexibility, especially relevant to Japanese buyers.
- Japan’s energy strategy has already led to new deals with U.S. suppliers, including JERA.
3. South and Southeast Asia
- Uncontracted demand may exceed 130 million tonnes annually by the mid-2030s.
- Existing long-term deals expire in the early 2030s.
- Emerging or price-sensitive markets may struggle to secure large volumes due to policy or financial constraints.
The Panama Canal: Strategic Gateway with Challenges
Advantages:
- U.S. Gulf LNG exports expected to grow from 120 MTPA in 2025 to 210 MTPA in 2032.
- Transit to Asia via Panama Canal saves up to 20 days and reduces costs to less than $1/MMBTU compared to Cape of Good Hope.
Constraints:
- Only two LNGC transit slots per day; no current plan to expand.
- New long-term reservation system (2024) still involves costly and unpredictable auctions.
- Severe droughts in 2023–2024 limited passage frequency.
Red Sea & Suez Canal Disruptions
- Houthi attacks since late 2023 pushed many LNG carriers to avoid the Suez Canal.
- Most 2024 transits were limited to regional deliveries (Egypt, Jordan), with only one major Europe-bound cargo.
- Middle Eastern suppliers hit hardest: rerouting via Cape of Good Hope adds 12–18 days.
Geopolitical Risks: Hormuz Strait
- Iran’s threat to close the Strait could cause short-term disruptions.
- Over 80 million tonnes of LNG pass through this strategic waterway each year.
Russia’s Evolving LNG Export Strategy
- Due to EU transshipment bans, Russia shifted operations to Murmansk.
- Russia is developing ice-class LNG carriers for the Northern Sea Route.
- However, delays persist due to limited access to Korean/Chinese tech.
- Murmansk’s floating storage (FSU) is currently restricted due to U.S. sanctions.
Summary
- U.S. LNG growth = More carriers needed
- Qatar optimizes fleet due to geography
- Lower prices boost demand → more ships
- Very low prices hurt projects → oversupply of ships
- FOB terms offer flexibility for uncertain long-term demand
- Panama Canal access is uncertain despite cost/time benefits
- Red Sea instability hurts Suez traffic
- Russia continues exporting via transshipment and NSR
- Summer NSR routes allow Russian LNG to reach Asia
Source: Wood Mackenzie – “Global LNG Shipping Long-Term Outlook 2025”