LNG Freight Rates Plummet Amid Market Oversupply

LNG freight rates have reached historic lows as the market struggles with an oversupply of vessels and limited cargo availability. As reported by S&P Global, the week ending Jan. 23, tri-fuel diesel electric (TFDE) carrier rates dropped significantly, with the Atlantic TFDE day rate falling to US$6,500 — an all-time low — down US$9,500 from the previous week, according to Platts. Asia-Pacific TFDE rates declined to US$8,000 per day, down US$4,500.  

Two-stroke LNG carriers also experienced a sharp decline. The Atlantic two-stroke day rate fell to US$10,000 per day, dropping US$15,000 in a week. In the Asia-Pacific market, rates reached US$15,000 per day, down US$7,000. The drop in TFDE demand has been particularly pronounced, with market participants noting that “TFDEs are basically out of the market” as two-stroke carriers remain the preferred option.  

The LNG shipping market has faced ongoing challenges since late 2024 due to an oversupply of newbuild vessels, delays in liquefaction projects, and a lack of floating storage demand in the European Union. In November 2024, spot rates for steam-turbine LNG carriers fell to US$11,250 per day — a 55% decline from the previous month — while TFDE carrier rates dropped to US$18,250, down 53% month-on-month. Two-stroke carrier rates stood at US$30,000 per day, reflecting a 43% monthly decrease.  

Long-term charter rates have followed the same downward trend. The Baltic Exchange assessed three-year period charters for two-stroke LNG carriers at US$62,700 per day, down 42% year-on-year. One-year charter rates declined 57% to US$43,800 per day, while six-month charters fell 71% to US$30,800 per day.  

Industry analysts attribute these declines to slow LNG export growth, which increased just 1% in 2024 compared to the typical annual growth rate of 6%-8%. “There are too many newbuilds, and there is no arbitration, no contango, and no real demand from China or Japan,” a shipbroker said.  

The downturn could accelerate the phase-out of older steam-turbine LNG carriers. According to Flex LNG, 75 steam carriers have charters expiring within the next 24 months, with 53 of these vessels likely to exit the fleet through scrapping or conversion into floating storage and regasification units. While few LNG carriers have been scrapped in recent years, recent transactions suggest that this trend may be shifting. In January 2025, the 2003-built BW Boston was sold for around US$35 million, with similar vessels reportedly being marketed for conversion projects.  

US LNG Policy and Market Implications

The expected policies of the Trump administration could further shape the global LNG market. Proposed deregulation measures aim to accelerate US LNG export capacity, potentially increasing global supply but also heightening concerns over market oversaturation.  

Mexico, a key importer of US natural gas, could benefit from increased supply and lower prices. However, the risk of persistent low LNG prices may pose challenges for energy planning and investment. Recent discussions between Mexican President Claudia Sheinbaum and US President Donald Trump have temporarily paused potential tariffs, with both countries committing to addressing border security and organized crime.