LNG Freight Rates Plunge to Record-Low Levels as Vessels Pile Up

The liquefied natural gas (LNG) shipping industry is grappling with historically low freight rates, as an oversupply of vessels and delayed liquefaction projects have created a challenging market landscape. As of January 2025, spot charter rates for LNG carriers in the Atlantic basin are approximately $24,000 per day, marking one of the lowest levels recorded for this period.

The primary factors contributing to the record-low LNG freight rates are the oversupply of LNG carriers, delayed liquefaction projects, and moderate global demand. The global LNG fleet has expanded significantly, with approximately 96 new LNG carriers scheduled for delivery in 2025. This influx exacerbates the existing oversupply, as fleet growth continues to outpace the addition of new liquefaction capacities. Several anticipated LNG export projects, particularly in the United States, have faced delays due to regulatory hurdles and construction challenges. These postponements have resulted in a slower increase in LNG supply, contributing to the mismatch between vessel availability and cargoes needing transportation. While Asian markets, especially China, are expected to drive LNG demand in 2025, competition from alternative energy sources and a push towards carbon neutrality may temper this growth.

To mitigate the impacts of low freight rates and promote market normalization, the LNG shipping industry can employ strategic responses such as fleet management adjustments and contractual negotiations. Shipowners are contemplating laying up or scrapping older, less efficient vessels to reduce oversupply and curtail operational costs. This strategy helps rebalance the supply-demand dynamics in the shipping market. Charterers are leveraging the current low-rate environment to secure long-term contracts at favorable terms, providing more stable cash flow for shipowners. Conversely, shipowners strive to maintain cash flow and fleet utilization, leading to a more competitive and flexible chartering landscape.

The LNG shipping industry faces significant challenges in the form of vessel oversupply and delayed liquefaction projects. However, by implementing strategic responses and addressing the underlying issues, the industry can work towards a more stable and sustainable market. As the global demand for LNG continues to evolve, the industry must adapt to ensure long-term success.