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Visiongain has calculated that the LNG Carrier market will see a capital expenditure (CAPEX) of US$11.208 billion in 2018.
In recent years, a large number of LNG carriers have been constructed. However, as prices fell, and the global market started to experience an oversupply of LNG due to a slowdown in LNG demand growth in the key countries of Japan, China and South Korea, suddenly there was no need for that many carriers to transport the commodity. As a result of the declining utilisation rates, LNG carrier charter rates have also fallen in 2014 and 2015.
These market conditions have led to significant delays and cancellations on the liquefaction side of LNG infrastructure expansion, which has sustained the mismatch between LNG carrying capacity and liquefaction capacity
The LNG carrier market is driven by the arbitrage opportunity that exists between the supply side (North America, Africa, Qatar, Australia and Russia) and demand side (East Asia, Europe and emerging importers) of the LNG market. Very strong dynamics on both sides has created an opportunity for profits to be made.
The LNG industry has witnessed several technological changes in the past few years. Increasing investments in small scale LNG terminals is one such upcoming trend which has penetrated the market in the recent years. The small scale LNG terminals are primarily designed to focus on the requirements of small demand and supply centres.
An oversupplied market will force down LNG prices. It is hoped that low prices will drive further demand growth, though, with a large number of LNG carriers expected to come online over the next 5 years (over 200 new vessels), charter rates and utilisation rates could fall if this fails to happen.
The full report can be accessed here.