While commercial ship market is floundering in a long-term depression, only LNG shipping market is under an upphase and large shipyards celebrate growing demand for LNG carrier.
As more and more consider liquified natural gas would become as important as oil and the demand for LNG is skyrocketing, ship owners around the world have been investing in LNG carrier segment since 2011, amid increasing LNG development.
However, as newbuilding orders are continuously rising, many owners' concern is growing gap between tonnage supply and demand.
Analyst George Lazaridis, Intermodal of Greece said, "Much of the recent optimism over the newbuilding investment for LNG carrier has been caused by rapid increase in demand created by Japan's need to find alternative energy sources to cover the nuclear gap."
He pointed out that spot freight rates have risen to their highest record of $160,000 per day, while short term period rates have followed not far behind.
Significant number of owners have been targeted this "niche" market due to sharp increase in rates, with the hope of high return on their investment.
However, many industrial specialists said that as Japan begins to restart some of its nuclear reactors, this demand will slowly decline and many of the upcoming LNG projects will be difficult to find buyers. Then, in the end, many idle vessels, without cargoes, will appear, Lazaridis mentioned.
He concerned that "Japan is by far the biggest LNG import country and is also one of the very few markets which can accept high LNG import prices, however, if Japan resumes to operate its nuclear reactors, LNG shipping market will inevitably face a significant imbalance between supply and demand."
India and China will not be actively involved in LNG import as being afraid by LNG price fluctuation, while the US and Europe have already managed to cover much of their needs through shale gas production.
He said, "Many of the speculative newbuilding orders since 2011 have been made on the basis of a strong increase in demand from Japan. The total LNG fleet stands at 370 vessels, while there are 74 vessels on order, of them 22 vessels to be delivered in 2013 and 34 in 2014.
He pointed out, LNG carrier market still remains a small niche market where every single new order adds significant capacity to the current fleet with high investment risks, considering $200m of its newbuilding cost.
Lazaridis said, for the same amount of money, shipowner could place an order for three MR tankers and five handysize bulkers. Return on LNG carrier seem higher than other shipping segments, however, take account of the risk involved and "Do not place all your eggs in one basket."