LNG Winter 2020/2021 – a unique set of circumstances or a predictable inevitability?
The Asian spot price peaks in January 2021 were not only due to very cold weather in Northeast Asia and supply disruptions at some LNG export plants but also due to an apparent lack of spare LNG tanker capacity. In previous OIES papers we have discussed this “Perfect Storm” that hit the LNG market. This paper, authored by Alex Booth, Head of Research at Kpler, focusses on the shipping element of this market event and the factors that drove freight rates to rise to such high levels. Arguing that the gas and LNG value chain operates at such fine operational tolerances that the cargo squeeze in January 2021 demonstrated that there needs to be additional flexibility to meet market and supply disruptions, the paper concluded that “The pipeline like nature of LNG logistics and relative lack of short-term flexibility, despite moves made by the market at the time to compensate, has proven the region to be unable to cope when pressed, putting East Asian consumers at a disadvantage”. Readers will get a real insight into the dynamics of the LNG shipping market and how key LNG shipping is to the LNG business.
This paper by Alex Booth and his team at Kpler gives a huge insight into the role of shipping in the recent LNG market turbulence and the implications of this turbulence on the future shipping market.