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Sonny
12-08-2008, 01:04 PM
Global LNG Ship Orders Slump to Lowest Since 1998 (Update2)

http://www.bloomberg.com/apps/news?pid=20601102&sid=aNiu5ICmelSw&refer=uk
By Dinakar Sethuraman

Dec. 5 (Bloomberg) -- The world’s biggest shipyards led by Samsung Heavy Industries Co. and Hyundai Heavy Industries Co. will record the lowest liquefied natural gas tanker orders in a decade as charter rates halve, a consultant said.

“This year saw the lowest ordering since 1998 when there were no new orders at all,” Navin Thakur, LNG shipping analyst for Drewry Maritime Services Ltd., said in a phone interview from Gurgaon, near New Delhi. Charter rates for ships transporting spot shipments have almost halved to about $42,000 a day.

Growth in LNG trade may slow to 2 percent this year after expanding 7.3 percent last year because of the delayed commissioning of ventures in Qatar, Russia and Yemen. The global recession has cut LNG demand and reduced financing for new ships. Banks which lent 90 percent of the cost of a ship are now funding less than half while borrowing costs rise, Divay Goel, director of Drewry Maritime Services Ltd., said today in Singapore.

“There are delays in LNG projects and new vessels are lying idle,” said Goel. “The vessels were delivered on time while projects did not materialize.”

LNG producers ordered six vessels of 981,000 cubic meters in total capacity this year compared with 23 in 2007 and 35 in 2006 with a combined volume of 11.34 million, he said.

Global ship orders tumbled 90 percent in October as shipowners booked a total of 37 container ships, tankers and other vessels compared with 378 a year earlier, according to Lloyd’s Registers Group.

Shares Decline

Shares of South Korea’s three shipbuilders, Hyundai Heavy, Samsung Heavy and Daewoo Shipbuilding & Marine Engineering Co., have declined more than 47 percent this year compared with a 45 percent drop in the benchmark Kospi index. Their shares rose today in line with regional stock markets after lower oil prices spurred optimism that costs will fall. Samsung Heavy rose 2.5 percent to 20,250 won, Daewoo climbed 4.4 percent and Hyundai Heavy was up 2 percent.

Charterers may have paid as much as $75,000 a day last winter for some tankers to transport the fuel while the rates since March this year have stayed below $50,000, Thakur said.

The Baltic Dry Index, a measure of commodity-shipping costs, surged to a record in May, having more than tripled in three years, and has since tumbled about 93 percent, to near six-year lows.

Shipyards delivered 39 tankers this year compared with 33 last year, and are scheduled to deliver 43 in 2009, 18 in 2010, 10 in 2011 and 4 in 2012, he said. Samsung and Daewoo account for 67 percent of the orders.

Second-Half Hopes

“The inactivity may be high in the first half of next year,” Thakur said, as these projects including Qatar, Sakhalin LNG, Tangguh LNG and Yemen LNG will ramp up shipments only in the second half.

Qatar, the world’s biggest LNG producer, has ordered 45 LNG tankers from three South Korean shipyards, each vessel capable of carrying more than 200,000 cubic meters, while the ventures producing the fuel have been delayed by a year.

Norway’s Snohvit LNG project, a new production line at Trinidad’s Atlantic LNG and Nigeria’s new train at the Bonny LNG plant are facing slower-than-expected increases in output, while Qatar’s new lines are delayed.

Only one project was approved this year at the port city of Arzew in Algeria, said Andy Flower, an industry consultant and a former executive at BP Plc’s LNG business, on Dec. 3 compared with a project each in Angola and Australia in 2007. Fewer approvals dampen orders for ships.

Most of the LNG carriers are chartered at $60,000 to $70,000 a day on a term basis for between 15 years and 25 years, Thakur said. Companies rarely order ships dedicated to spot trades unless they have access to supplies.

LNG is natural gas that has been reduced to one-six- hundredth of its original volume at minus 161 degrees Celsius (minus 259 Fahrenheit) for transportation by ship to destinations not connected by pipeline. On arrival, it is turned back into gas for distribution to power plants, factories and households.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net.
Last Updated: December 5, 2008 02:21