Record orders for LNG tankers in 2022

Shipbuilders enjoyed a record year for liquefied natural gas tanker contracts in 2022 — and they expect the boom to continue for some time as demand for the fuel rises.

Global orders for the specialist vessels reached 163 in 2022, data from Refinitiv show, more than double the the previous year’s figure and the highest since 2011, the earliest data available.

As prices surge, big South Korean shipbuilders responsible for the bulk of the existing LNG tanker fleets told the Financial Times they expected a boost to their earnings despite high material costs weighing on margins.

But industry observers have warned that elevated steel prices, labour shortages and limits on construction capacity will constrain shipbuilders’ ability to capitalise on the rush to secure the tankers.

He said the company expected the trend to “continue at least for the next two to three years, with more than 50 new LNG carriers likely to be ordered a year”.

Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries, which both reported net losses in 2021, also said they expected to notch up profits this year.

But Daewoo said high steel prices were “eating into our earnings”, while Samsung said it was in talks with steelmakers “to lower the prices”.

Analysts said the large number of global orders were tied to Qatar’s expansion of its North Field project, a plan to increase the Gulf state’s LNG export capacity from 77mn tonnes a year now to 126mn tonnes by 2027. The International Gas Union estimates that the North Field project alone would need about 150 LNG carriers.

The majority of 2022’s LNG tanker orders are expected to be delivered by the end of 2026.

Demand for LNG is surging around the globe, with Europe rushing to find alternatives to piped natural gas from Russia in response to the invasion of Ukraine while developing nations in regions such as Asia try to transition from coal to less polluting natural gas.

To meet demand, LNG projects are being expanded, particularly in the US, now the largest LNG supplier to Europe.

While not expected to reach the same level as 2022, new orders for LNG tankers are likely to continue, said Kaushal Ramesh, head of LNG analytics at Rystad Energy.

There were 641 LNG tankers, highly specialised vessels able to carry liquefied gas at -163C, in operation worldwide as of April, International Gas Union data show. Vessels made by Korean shipbuilders accounted for 70 per cent of the total.

Korean shipbuilders also dominated the new orders in 2022, taking 105 orders. Shipbuilding capacity at the Korean companies is full for the next three years. Labour shortage in the sector is leading to higher costs, which is also feeding through to tanker prices.

The average cost of an LNG tanker rose to $250mn in 2022, from $200mn in 2021, industry experts say.