LNG becoming more competitive in bunker hubs

LNG bunker prices have halved in Singapore and Rotterdam and the fuel grade price premiums over conventional marine fuels are narrowing.

PHOTO: Chevron’s LNG carrier Asia Excellence at sea. Chevron Shipping Company

Rotterdam’s LNG prices averaged about $1,010/mt in February, halving from levels of $2,050/mt seen in December. A steeper downward trend was also noticed in Singapore, where LNG prices halved from $1,870/mt in December to less than $900/mt in February.

The drops in LNG bunker prices have to some extent mirrored declines in the Platts Japan Korea Marker (JKM) contract – an LNG benchmark price assessment for physical spot cargoes. The front-month Platts JKM contract has come down from an average of $23.64/MMBtu ($1,230/mt) in December to $14.36/MMBtu ($746/mt) in February.

Plunging LNG bunker prices have contributed to narrow their price premiums over conventional fuel grades such as VLSFO and LSMGO - particularly in Singapore.

Singapore’s LNG premiums over VLSFO and LSMGO between December and February:

• Narrowed from $1,255/mt to $250/mt vs VLSFO
• Narrowed from $956/mt to $72/mt vs LSMGO

Rotterdam’s LNG premiums over VLSFO and LSMGO between December and February:

• Narrowed from $1,519/mt to $433/mt vs VLSFO
• Narrowed from $1,194/mt to $209/mt vs LSMGO

Lower LNG bunker prices could encourage ships with dual-engines to switch to burning LNG more frequently. According to an estimate by classification society DNV last month, only 30-40% of ships capable of running on LNG were actually burning it, opting rather for conventional fuels or biofuel blends.

Soaring natural gas prices triggered widespread gas-to-oil switching among vessels with dual-fuel engines and dented overall LNG bunker sales last year. Rotterdam sold 328,000 cbm of LNG bunkers in 2022 - a sharp decline from 604,000 cbm old in 2021. The recent LNG price comedown could revive demand again.

However, energy watchdog International Energy Agency (IEA) has cautioned that global LNG prices could rise once again as demand picks up in Asia, especially with the reopening of China. In 2022, natural gas demand in Asia fell by 2%, primarily because of high LNG prices and damp Chinese demand while it still enforced its zero-Covid policy. But also because northeast Asia experienced a milder winter with less heating demand, the IEA said in its latest gas market report.

Chinese LNG imports accounted for 24-32% of Asia's total LNG imports between December and February, data from cargo tracker Vortexa shows. The country imported a total of 4.15 million mt of LNG in the shorter month of February, down from 4.98 million mt in January.

The global LNG-fuelled maritime fleet is currently made up of 361 vessels, with another 182 expected to join this year, DNV data shows.

By Nithin Chandran

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