20/09/2022
๐ณ๏ธSevere shortage of ships! Soaring shipping costs exacerbate energy crisis ๐ณ๏ธ
The cost of energy shipping is soaring as a scramble for supplies in Europe has led to a shortage of ships carrying essential fuels this winter.
The Russian-Ukrainian conflict has forced ships to transport LNG, diesel and crude oil from farther than usual to Europe to replace Russia's energy supplies. Shipping experts say this has kept ships occupied longer and delayed their return to service, triggering a rise in global freight rates.
LNG freight rates are higher this time of year, and this year is likely to surpass last year's winter peak. The cost of shipping U.S. oil cargoes to China is the highest since 2020, while the cost of naphtha petrochemical feedstock cargoes from the Middle East to Japan more than doubled in March, according to data from the Baltic Exchange.
Traders and shipowners said the shortage of ships could affect Asian economies that import oil and gas from the United States, as they may find it difficult to obtain spare cargoes on short notice if the weather turns unusually cold this winter. Even petrochemical feedstocks are becoming more expensive to transport, further burdening buyers who are already slowing production due to sluggish demand.
Oystein Kalleklev, chief executive of ship owner Flex LNG Management AS, said there were few LNG vessels available for charter throughout the winter and only for short voyages. The owners, who had previously booked their fleets, are now asking to return their ships for use when the Freeport LNG export plant resumes operations, he said.
The Freeport natural gas export facility in Texas, which suffered a fire in June that disrupted most U.S. LNG exports, is scheduled to restart in November.
While companies are booking winter ships earlier than usual this year, the energy giant has refused to release LNG ships at the end of the summer as in previous years. According to traders and shipbrokers, tankers acquired at lower freight rates have been chartered, with charterers sometimes even burning extra fuel to shuttle between Singapore and Malaysia in order to keep the vessel.
Meanwhile, traders are filling ships at sea with natural gas and petroleum fuels to ensure supplies are maintained in a tight market, taking up more ships. "What we've seen in the shipping industry this year has been phenomenal," said Peter Sand, principal analyst at freight market analysis platform Xeneta.
