The spot charter rates for shipping U.S. liquefied natural gas to Europe have just turned negative, suggesting that there are now too many LNG vessels in the Atlantic region but fewer requirements, according to LNG freight price assessor Spark Commodities.
In December and January, dozens of cargoes of U.S. LNG flocked to Europe, which had a record-high natural gas price amid the gas and energy crisis. The crisis pushed regional LNG prices way above the Asian LNG benchmark and 14 times higher than the U.S. Henry Hub price. Tankers were not only traveling between the U.S. and Europe, but many were also diverted away from Asia to Europe as spot sellers took advantage of the higher gas prices in Europe.
As the number of available LNG tankers in the Atlantic basin surged, freight rates plummeted. On Tuesday, Spark Commodities assessed its first-ever negative spot LNG freight rate at -$750/day for the Spark30S Atlantic assessment.
The negative freight rate “Highlights how current vessel charter payments do not cover the fuel cost of ballasting the vessel back to load port. Lots of ships and few requirements,” Spark Commodities noted.
Last week, LNG freight rates continued to slide on the back of weak vessel demand and increasing availability in both the Atlantic and Asia Pacific basins, according to Spark Commodities.
“There just aren’t enough charter requirements to keep these ships fully utilized,” Tim Mendelssohn, managing director of Spark, told Bloomberg on Tuesday, commenting on the negative rates for Europe.
The recent slide in LNG tanker rates is a dramatic shift from late last year when freight rates reached an all-time high with Asia stocking up for the winter and Europe desperate for any gas supply in the crisis.
Now the soaring European imports from the U.S. have sent spot freight rates below zero.
Europe was the top destination for U.S. LNG exports in January, for a second month running, ahead of Asia, according to Refinitiv data cited by Reuters last week. Roughly two-thirds of U.S. LNG exports traveled to Europe last month after 61 percent of American LNG shipments went to Europe in December.