Market Insight | Week 05

The LNG shipping sector has entered 2025 under pressure, amid challenging market fundamentals and significant geopolitical developments. U.S. energy and trade policies, the evolving situation in the Red Sea and the impacts of the cessation of Russian pipe-line gas flows through Ukraine’s territory are expected to exert considerable influence over the LNG market.
In the wake of President Trump’s recent announcement of 10% tariffs on imports from China, along with a temporary pause on similar measures for Mexico and Canada, China has responded with its own set of tariffs, including a 15% tariff on U.S. LNG. These developments raise concerns about a shift towards a new trade war. The evolving tariff landscape may lead to impacts on LNG prices and reshuffling in trade patterns, affecting shipping routes and ton-mile demand.
Additionally, the cessation of the Russian natural gas flows through Ukraine has prompted Europe to seek for alternative sup-ply sources to decrease its dependency on Russian gas. The market has witnessed a spike in seaborne LNG imports from USA through the Greek terminals of Revithoussa and Alexandroupoli. It is expected that this trend will continue, with increased imports via Greece and Turkey as EU puts efforts to meet the LNG needs of Central Europe which were previously covered by the Russian pipeline. In general, the US LNG exports to Europe are expected to rise, nevertheless, the shorter distances compared to the US-Asia trade, imply a reduction in ton-miles.
Moreover, the potential reopening of Red Sea trade following the ceasefire in Gaza is expected to have mixed effects on the LNG shipping sector. On the one hand, it may rejuvenate certain routes such as Qatari LNG shipments to Europe, or Algerian exports to Asia. However, reduced deviations around the Cape of Good Hope would likely decrease ton-mile demand while simultaneously in-creasing the active tonnage supply of an already sizable LNG fleet. Additionally, the timing of a full resumption of Suez Canal trade and the assessment of risks of navigating this route by the U.S. shippers are important factors to consider.
For 2025, the LNG trade is expected to increase by 4.6%, nevertheless it is estimated that the market will remain under pressure, since this growth is expected to be outpaced by a more robust expansion of tonnage supply.
LNG shipping sector is experiencing a downturn, as boldly reflected in the record low freight rates, which are declining constantly since 2H 2024. Presently the spot rate of a 174K cbm LNG carrier stands at the depressing $9,000, which is 83% lower than the 2024-average of $54,149/day. The TC market follows the same trend, with 1-year TC rate having settled at $25,000/day versus $68,962/day average TC of 2024, which can be considered al-ready a year of low rates, considering 2023 and 2022 averages ($152,308/day and $172,096/day respectively).
Moving to the supply side, overcapacity prevails, as many vessels have entered the market following the ordering wave of the post covid period. The tonnage is expected to keep growing on a robust pace of 10% and 12% in 2025 and 2026 respectively, since the orderbook is still high, at 49.50% of the total tonnage. Presently, the LNG fleet comprises 806 units of ca. 121.33 m cbm aggregate capacity, implying a 7.9% y-o-y growth. Most of these vessels are large, above 140,000 cbm tonnage, counting 633 vessels of approximately 108.3 m cbm (89% of total capacity). In Jan-uary the newbuilding prices declined gradually, from $260m (for a 174k cbm vessel) at the beginning of the month to $257m by month-end, 2.3% lower than 2024 average price of $262.97 m.
On the demolition front, it seems that the first scrap sale for 2025 took place, as the S. Korean owner Hyundai LNG Shipping decided to sell for recycling a 29-year-old LNG carrier. Despite a subdued activity in 2024, some owners may consider dismantling older tonnage in 2025, given the current market conditions, and especially the units redelivering from long term contracts. In 2024 re-cycling activity comprised 8 vessels totaling approximately 0.96 m cbm, versus 7 units demolished in 2023 (0.69 m cbm).