Global LNG bunker volumes declined amid high prices - report

LNG bunker volumes declined in the first quarter, marking the first quarterly drop in three years as cold temperatures and the Middle East war pushed prices higher, consultancy Lansdowne Moritz said.

Lansdowne Moritz estimates that global LNG bunker volumes slumped below 1 million mt in the first quarter, after crossing that figure in the previous quarter.

Its report said the decline was caused partly by prolonged cold temperatures in January which tightened global gas markets, curtailed US LNG exports and pushed prices higher. The closure of the Strait of Hormuz due to the conflict in the Middle East also sent LNG markets into turmoil.

The combined impact of these factors eroded LNG’s price competitiveness against VLSFO across key bunkering hubs, although LNG periodically regained its edge as VLSFO prices also surged, Lansdowne said.

ENGINE’s price observations show LNG’s price premiums over VLSFO in Singapore and Rotterdam in volatile pattern, with sharp increases and drops during the first quarter. Singapore’s LNG price was at a discount to VLSFO briefly in March.

Lansdowne said dual-fuel LNG vessels appeared to have switched to conventional fuels during bunker price surges, which may have hit LNG bunker demand.

Uneven impact across regions

Europe’s position in the LNG bunker market weakened during the first quarter as TTF benchmark prices rose above JKM from mid-January amid inventory concerns.

The continent’s share of the global bunker market were estimated to have dropped from 52% in January to just 37-38% in February and March, according to the report.

France’s LNG bunker volumes rose by around 41% in the first quarter, while volumes in the Netherlands increased by about 9%, the estimates showed. Bunker sales in Germany and Belgium fell by roughly 40%.

Spain’s LNG volumes declined by around 26% in the first quarter, according to the estimates. Earlier this year, industry group GASNAM said the Iberian Peninsula could overtake the Netherlands as a leading LNG bunkering hub.

Meanwhile, LNG bunkering in Asian hubs was supported by stronger pricing dynamics and first-stem bunker demand from newbuilds. Vessels built in Chinese and South Korean shipyards usually take their first stems after vessel delivery in relatively nearby LNG bunker locations.

Around 70% of LNG bunker demand from newbuilds was delivered in Asia, Lansdowne said.

It estimates that China’s bunker volumes increased by 10% in the quarter, while Singapore’s volumes fell by around 14%.

America an outlier during

In contrast to slowdown in other regions, LNG bunker volumes in the US and Canada more than double compared to the previous quarter.

Lansdowne Moritz said LNG bunkers priced against domestic US and Canadian gas benchmarks like Henry Hub and AECO were largely insulated from the global price spikes linked to TTF and JKM.

The research said the Americas’ growth indicates that buyers with more flexible LNG bunker supply portfolios are best placed to reduce fuel costs over time.

By Nachiket Tekawade

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