LNG Shipping Rates Hit Five-Year Lows Amid Increased Vessel Availability

Shipping rates for liquefied natural gas (LNG) cargoes have plunged to their lowest levels in five years as an expanding global fleet of newly built carriers surpasses demand, while shorter voyage times further boost vessel availability.

According to pricing agency Spark Commodities, Atlantic freight rates for vessels with two-stroke engines capable of carrying 174,000 cubic meters of LNG—the most common type in the market—were assessed at $4,250 per day on Tuesday. By Friday, rates had plummeted to $3,500 per day, marking the lowest figure recorded since Spark began collecting data five years ago. Since the beginning of the year, Atlantic shipping rates have dropped by 82%, and they are down by over 90% compared to the same period last year.

A similar downward trend has been observed in the Pacific market. Rates for the same class of ship on Pacific routes have nearly halved this year, reaching $11,000 per day on Tuesday—another record low in Spark’s dataset. This marks a decline of nearly 80% from the previous year.

Vessel Oversupply Outpaces Demand Growth

Deng Xiaoyi, deputy head of global LNG freight pricing at Argus, attributed the decline in shipping rates to a growing global LNG fleet in 2024, while overall LNG loadings have only marginally increased. "This oversupply of vessels comes as the market awaits a significant rise in LNG export capacity over the next 18 months," Deng stated.

With more vessels available, charterers and ship owners are under pressure to find employment for their ships. "Companies with excess shipping capacity have opted to slash their rates rather than keep vessels idle, allowing them to recover part of their operational costs and minimize losses," Deng added.

The market impact has been particularly severe for older vessels equipped with tri-fuel diesel engines and a capacity of 160,000 cubic meters. Atlantic rates for these vessels turned negative over the past week, reaching a record low of minus $2,750 per day on Monday before improving slightly to minus $1,000 per day on Tuesday, according to Spark Commodities analyst Qasim Afghan.

Negative shipping rates are rare, having only occurred once before in February 2022, just prior to Russia’s invasion of Ukraine. "Negative round-trip freight rates indicate that shipowners’ earnings are insufficient to cover fuel expenses for returning their vessels to load ports," Afghan explained.

Market Outlook: Further Declines Possible

Market analysts predict that LNG shipping rates could remain low well into 2025, as the supply of new LNG carriers is expected to outpace the growth in LNG production. In addition, higher LNG prices in Europe have incentivized U.S. cargoes to remain in the Atlantic region rather than traveling to Asia, reducing overall voyage lengths and increasing vessel availability. In January alone, at least six LNG cargoes were redirected from Asia to Europe.

Further compounding the situation are Chinese tariffs on U.S. LNG imports and record-high numbers of newly constructed vessels entering the market this year. Afghan suggested that these factors could keep freight rates at current levels for the foreseeable future.

"The U.S. arbitrage to Asia is currently expected to remain closed for the rest of 2025," Afghan noted. "A significant shift in the JKM-TTF spread would be required for market signals to redirect cargo flows toward Asia."

On Tuesday, European gas prices at the Dutch TTF hub stood at $15.76 per million British thermal units (MMBtu), while Asia’s benchmark Japan-Korea-Marker (JKM) price was slightly lower at $14.41 per MMBtu.

As LNG markets continue to adjust to shifting supply and demand dynamics, shipowners and charterers face mounting challenges in navigating an oversupplied shipping landscape and historically low freight rates.

*This article has been edited by the Worldcraft Logistics content team to better suit our readers. This article was edited from the original content "Reporting by Emily Chow in Singapore and Marwa Rashad in London; Editing by Christian Schmollinger"