LNG shipping costs soaring

Bloomberg

The cost of chartering a liquefied natural gas vessel on the short-term market has jumped the most since at least 2013.
The day rate for a standard tanker East of the Suez Canal jumped 57% in the week to October 9, as issues related to US sanctions on units of China’s Cosco Shipping Corp. start to hit just as the heating season begins to boost demand. That comes on top of other factors limiting the number of ships available, including Typhoon Hagibis in Japan, the biggest buyer of the fuel, and the stockpiling of fuel on tankers.
The skyrocketing rates, which have more than doubled in less than a month, show how US sanctions on units of China’s largest shipper are impacting global trade flows, having already fueled steep increases in oil tanker rates. China plans to ask the US to lift sanctions on the shipper at high-level trade negotiations.
“It is a super tight market at the moment,” a spokesman at LNG tanker owner GasLog Ltd. said by phone. “We don’t know whether the COSCO sanctions will have a meaningful impact on the LNG shipping market, but it is influencing sentiment.”
Benchmark LNG spot shipping rates east of the Suez Canal jumped to $130,000 a day on October 9, according to Fearnleys in London. Spark Commodities Pte Ltd., a venture between commodity tracking company Kpler SAS and the European Energy Exchange, puts the rate at $133,200.
China National Offshore Oil Corp. is seeking two cargoes for prompt delivery to its Dapeng terminal because of the sanctions, according to traders with knowledge of the matter.
The company didn’t immediately respond to a request for comment.
Woodside Petroleum Ltd.’s North West Shelf LNG venture in Australia wouldn’t load two tankers that were meant to deliver cargoes for CNOOC because the vessels are owned by a unit of Cosco, according to the traders.
A Woodside spokesman declined to comment on specific loadings, and said the company is aware of the sanctions and will comply with all legal obligations. COSCO Shipping didn’t respond to an email seeking comment and didn’t answer calls from Bloomberg.
The Tangguh project in Indonesia and Bintulu in Malaysia also wouldn’t load Cosco-owned vessels meant for CNOOC. CNOOC uses two Cosco vessels to transport gas from Tangguh and one from Bintulu. All three are currently anchored, according to ship-tracking data.

Five specialized ice-class vessels for Russia’s Yamal LNG project in the Arctic, chartered from a joint venture between COSCO unit China LNG Shipping (Holdings) Ltd. and Teekay Corp., are still on routes serving the project normally, according to ship-tracking data. Novatek PJSC, the majority shareholder of Yamal LNG, has said it has tanker capability via transshipments to fully meet its obligations should the sanctions drag on, and that it hopes the issue around sanctions will get resolved quickly.
Thanks to rising shipping rates, Teekay shares have rebounded 30% after they were dragged by the sanctions to a one-month low on Oct. 2. They climbed 7.8% to $4.72 at 1 p.m. in New York on Friday.
The sanctions, imposed on two COSCO shipping units last month due to alleged shipments of Iranian crude oil, came just as the stockpiling rush intensified in anticipation of higher fuel prices in the winter and price incentives to hold onto cargoes.