(EnergyAsia, March 25 2013, Monday) — After the “dream run” of 2011 and 2012, shipping demand for liquefied natural gas (LNG) could be headed for the doldrums through 2015, predicts Drewry Maritime Research.

In its latest LNG Insight report, the UK-based firm said its LNG Freight Index fell four percent in February as a result of weaker heating demand in major importing regions as well as reduced supply brought on by some unplanned shutdowns at producing plants.

The previous two years, the LNG shipping market grew strongly due largely to increasing tonne-mile demand and an almost stagnant fleet.

The Drewry Freight Index measures rates based on actual deals and market reports for a conventional LNG carrier of between 160,000 cubic metres (cbm) and 173,000 cbm of less than five years of age. The hire period for long-term freight rate assessments are for charter durations of 15 years or more, while short-term freight rate assessments are based on charter duration of one to three years. The base year for the index is January 2005.

“Freight market prospects would be even brighter if fleet supply were to remain at current levels, but this will not be possible as 81 more vessels could join the fleet during 2013-15, while only 10 vessels could be considered as demolition candidates,” said Drewry.

The fleet could grow to 430 vessels, after accounting for projected demolitions, by the end of 2015, representing a rise of 20% from current levels.

The orderbook-to-fleet ratio was 30% at the end of February, while it was just over 8% at the end of 2010. In 26 months, fresh orders for 89 vessels aggregating 14.5 million cbm were placed, said Drewry.

While fleet building and delivery are taking place, ship owners will be greatly concerned that there will be little expansion of global liquefaction capacity between now and 2015.

Adding to their fears is that Japan may attempt to re-start some of their nuclear power plants, thus reducing demand for LNG.

“Japan was the single largest factor driving the market in 2012, and the trend is expected to continue in 2013, as re-starting all of the nuclear facilities cannot be a hurried process,” said Drewry.

Nevertheless, shipowners are worried as they would need about 40 million tonnes per annum of new LNG capacity to start up to employ their idle vessels.

“Unfortunately, this is not on the cards, so the short-term and spot freight markets are likely to start falling soon,” said Drewry.

However, prospects are expected to brighten up in the second half of the decade as liquefaction capacity expansion plans in Australia, the US and Africa will lead to increased demand for more LNG vessels.