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Two-stroke LNG vessel role to grow as ICIS adds assessments

ICIS has added daily charter rate assessments for Two-stroke LNG vessels to reflect the growing importance of the market’s most efficient carriers.

LNG shipowners plan to replace more TFDE-propelled tonnage with more efficient Two-Stroke vessels going forwards.

Higher carrying capacity and optimal utilisation rates are behind the shifts in the LNG fleet, where Two-stroke charters can command a premium of 10-20% compared with TFDE-propelled ships.

MEGI and XDF vessels are the most common categories of Two-stroke LNG carriers where gas is injected into the combustion engine.

With their greater carrying size and fuel efficiency, they often command a premium of $10,000-20,000/day over the TFDE sector.

New TFDE-propelled tonnage is expected to be faded out over the coming years, along with the least efficient steam propelled segment of the market.

Steam-propelled tonnage dominated LNG shipping for years, with nearly 250 steam-propelled vessels built since the early 1970s but retirement of the fleet is expected over the next 20 years.

There have been just over 100 DFDE vessels built and there are under 100 TFDE vessels in the fleet, according to ICIS LNG Edge data.

The current order book is dominated by XDF vessels, with MEGI and TDFE/DFDE vessels coming up behind.

Although XDF vessels were more expensive to build than MEGIs several years ago, the prices have begun to align.

While South Korea’s Daewoo has ordered more MEGI vessels in recent years, global owners like South Korean Hyundai have elected to build their XDF fleet at the expense of any other.

That said, Daewoo’s order book includes a mix of vessel types, including XDF tonnage.

Lower boil-off rates mean these are better aligned to absorb free-on-board offtake from US-based LNG projects.

The typical volume offtaken from US projects, although it can be marginally reduced, is not so well aligned with the carrying capacity of TFDE-propelled tonnage, which stands at around 160,000 cubic metres (cbm).

XDF and MEGI vessels range between 174,000-180,000cbm in capacity.

This difference allows charterers to achieve cost efficiency of 10% or higher en route to Asia.

US LNG exports reached a new record high in March, and its role as a global swing supplier is growing.

Given the trade growth of US-based projects, and spot US supply, MEGI and XDF-type tonnage will play an increasingly larger role.

Two-stroke vessels are emerging as the most liquid segment of the LNG shipping market in spot trade.

Rates for mid-term markets also carry premiums.
Source: ICIS, by Roman Kazmin, https://www.icis.com/explore/resources/news/2021/06/23/10655478/two-stroke-lng-vessel-role-to-grow-as-icis-adds-assessments

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