As liquefied natural gas (LNG) shipping rates continue to fall, the retirement of old steam turbine LNG carriers is accelerating. South Korea’s SK Shipping recently sold four LNG carriers, namely the SK Summit, SK Supreme, SK Splendor and SK Stellar, for $13.8 million each.
The four LNG carriers have an empty ship weight of approximately 29,000 to 30,000 tons, a cargo capacity of 138,000 cubic meters, are steam turbine driven, and were built by a Korean shipyard between 1999 and 2000.
Due to the lack of new buyers, these vessels were sold for scrap. The specific shipbreaking yards have not been disclosed yet. The four LNG carriers previously had long-term charter contracts with Korea Gas Corporation, which are set to expire by the end of the year. Before the expiration, these four vessels were sold in Singapore.
Steam turbine LNG carriers are the first generation of LNG carriers, driven by marine diesel engines. Compared with modern LNG carriers, this type of vessel has a smaller cargo capacity and lower fuel efficiency, so it has gradually been marginalized in the charter market. The recent sharp drop in LNG freight rates has further accelerated the elimination of this type of vessel.
A surge in LNG carrier orders sparked by the Russian-Ukrainian conflict and a drop in global demand due to a recent mild winter have contributed to a sharp drop in LNG freight rates. Short-haul LNG freight rates on the transatlantic route fell 40% last week to $15,000 per day, while long-haul rates fell 30% to $21,000 per day. Daily rates for steam turbine LNG carriers have plummeted to just $7,000, well below their operating costs.
This year alone, 12 steam turbine LNG carriers have been scrapped and sold after failing to secure new charters, and industry experts predict that more such vessels could enter the market by early next year.
Clarksons estimates that there are about 230 steam turbine LNG carriers still in operation around the world, accounting for 30% of the global LNG fleet. Analysts predict that more than 30 steam turbine LNG carriers may be sold by the end of this year. The expiry of long-term charters is likely to result in more vessels entering the demolition market, with two to three vessels of this type expected to be demolished each month by 2024.
“The retirement of steam turbine LNG carriers reflects a broader global trend. As freight rates continue to fall, these older vessels are losing competitiveness and are naturally being replaced by more efficient and modern vessels,” said a shipping industry insider.