For LNG, The Next Challenge Is Not Production, But Delivery

In this episode of Capital Link's Shipping Sector Webinar Series, we were joined by Mr. Jerry Kalogiratos, CEO of Capital Clean Energy Carriers Corp. (NASDAQ:CCEC), Mr. Knut Traaholt, CFO of Flex LNG Ltd. (NYSE:FLNG), Mr. Karl Fredrik Staubo, CEO of Golar LNG (NASDAQ:GLNG), and Mr. Spyros Leoussis, CCO of Maran Gas Maritime Inc. The webinar, moderated by Mr. Michael Webber, CFA, Managing Partner | Energy Infrastructure at Webber Research & Advisory, explored the current LNG market trends and forward-looking opportunities, with panelists discussing global LNG production forecasts, shipping demand dynamics and evolving market fundamentals offering insights into supply-demand balances, pricing implications, and geopolitical risks impacting the sector. The discussion also addressed newbuilding pricing, shipyard capacity constraints, and the long-term outlook for LNG shipping infrastructure, alongside considerations around speculative ordering activity and challenges related to U.S.-flagged LNG vessels. To watch the full discussion please visit the following link: https://www.youtube.com/watch?v=b7w2yKRfJW4 The Shift in Incremental LNG Supply The global LNG market, currently estimated at approximately 430 million tonnes per annum (MTPA), is projected to add approximately 200 MTPA over the next five years, representing nearly a 50% increase in supply. It's important to note that 65% of this incremental capacity is expected to originate from the United States. Commenting on this structural shift, Mr. Karl Fredrik Staubo noted that the market is transitioning "from one driven primarily by demand to one that will increasingly be shaped by international LNG prices, with the U.S. emerging as the marginal producer." Mr. Staubo commented on this transition. This drive toward geographic and supply diversification was further demonstrated by Golar's recent sale of 2 million tonnes of LNG from an Argentine project to Germany's SEFE, reflecting a deliberate strategy to reduce reliance on U.S.-sourced LNG. Emerging Structural Tightness Across the Global LNG Carrier Market Panelists expressed a clear consensus that the LNG carrier market is about to face a prolonged period of structural tightness, beginning in the 2027-2028 timeframe. Mr. Kalogiratos emphasized that LNG shipping is largely price – agnostic, functioning effectively as a floating pipeline, with demand driven primarily by volumes. In such an environment, the sheer scale of incremental LNG supply becomes the dominant driver Mr. Spyros Leoussis further noted that charterers have already begun seeking to secure LNG carrier tonnage for the 2028–2029 period, albeit at an early stage. However, he cautioned that current contracting activity represents only a fraction of the capacity that will ultimately be required, stating, "I still think this is a very small part of what the market will need at that time." Mr. Jerry Kalogiratos reinforced this view, stating that he expects a significant portion of 2029 capacity to be committed within the first half of 2026. Concurring with this assessment, Mr. Traaholt observed that shipyards and key technology providers such as GTT have strong incentives to keep prices elevated given the visible demand. Key Demand Drivers and Geopolitical Variables Several geopolitical factors could disrupt or reshape trade flows. The predominant concern appears to be the state of U.S. and China relations. "China will be a big factor for LNG," stated Mr. Leoussis, as evidenced by Chinese regasification build-out. A trade war or any escalation that restricts US LNG exports to China would also have meaningful implications for global LNG shipping patterns and vessel demand. On the other hand, Mr. Traaholt believes that a resolution to the war in Ukraine could be a net positive for LNG shipping, as it might unlock new Russian liquefaction projects needing vessels. Mr. Jerry Kalogiratos emphasized that a renewed and sustained return of Chinese demand could act as a powerful catalyst for LNG shipping. In such a scenario, the implied multiplier for LNG carrier demand increases sharply, with vessel requirements nearly doubling almost immediately. Contracting and Market Structure Evolution The upcoming LNG shipping cycle is expected to differ from previous cycles, driven by the significant volume of merchant LNG capacity lacking long term off-take agreements. This structural shift is likely to introduce greater short-term volatility in freight rates, as uncommitted volumes actively chase market opportunities according to Mr. Kalogiratos. Building on this point, Mr. Leoussis added that this environment would likely favor medium-term charter structures, typically in the two-to five-year range, rather than traditional long-term charters, as players without specific long-term SPAs would seek flexibility. "If those cargoes still come to the market, we’re still picking them up", continued Mr. Kalogiratos. When addressing the topic of speculative LNG carrier newbuilding, both Mr. Leoussis and Mr. Kalogiratos indicated that their respective companies routinely order on a speculative basis. In contrast, Mr. Traaholt expressed a more cautious stance, citing the capital commitments and the potential risk of new vessels competing with a company's existing fleet that may be coming open in the same period. Disclosure: Capital Link is the investor relations advisor to Capital Clean Energy Carriers Corp. This content is for informational purposes only and not intended to be investing advice. The article includes statements made by company management during the sector webinar. Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.