Bunker volatility reshapes freight economics for LNG-fueled tankers

Rising LNG bunker prices pushed LNG-fuelled clean tanker freight higher at a faster pace than conventional rates during the week of Aug. 31–Sep. 4, highlighting the additional bunker-price sensitivity that alternative-fuelled vessels carry relative to standard tanker economics.

Platts LNG-fuelled Clean tanker freight represents the estimated cost of transporting cargo on a tanker using LNG as its primary fuel, with the freight calculation reflecting prevailing LNG bunker prices. As LNG bunker prices change, the fuel cost associated with operating the ship changes, directly affecting the freight economics of the voyage.

During the week of Aug. 31–Sep. 4, a sharp spike in LNG bunker prices coincided with strengthening Worldscale assessments across several clean tanker routes, pushing LNG-equivalent freight materially higher than conventional rates over the same period.

The divergence was most pronounced on Arabian Gulf-Japan routes, where LNG-equivalent freight climbed around 4%, more than double the gain recorded in conventional freight over the same period.

AG-Japan divergence

The strongest move was seen across the AG-Japan routes, including Jubail-Chiba, Ruwais-Yokkaichi, and Ras Tanura-Yokohama. The daily LNG-fuelled freight rates, also referred to as Platts LNG Base Rates (PBR) on the Jubail-Chiba route, increased from $35.36/metric ton on Aug. 31 to $36.06/mt on Sept. 4, a 2.04% rise. Over the same period, the applicable Worldscale daily assessment increased from w490 to w500.

To place LNG-fuelled tanker economics on a comparable footing with conventional freight, the analysis uses an "LNG-equivalent freight" measure, a normalized calculation that applies the prevailing Worldscale level to the LNG-fuelled vessel's daily freight component, rather than a separate market assessment.

On that basis, Jubail-Chiba LNG-equivalent freight reached approximately $180.3/mt on Sept. 4, calculated as $36.06/mt multiplied by 500/100, compared with approximately $173.3/mt on Aug. 31. The resulting weekly increase of around 4.1% compared with a 1.98% rise in conventional freight rates over the same period.

Outside the AG-Japan corridor, the analysis found no significant changes in freight costs on other clean benchmark routes, with LNG-fuelled tanker rates showing minimal or similar moves throughout the week.

Bunker price backdrop

The acceleration in LNG-fuelled freight came against a backdrop of sharply higher LNG bunker prices during the week. Singapore LNG bunker prices rose significantly, increasing by around $62/mt to $1,399/mt on Sept. 2 from $1,337/mt on Aug. 31, before easing to $1,377/mt on Sept. 4. Rotterdam LNG bunker prices were subsequently quoted at around $1,402/mt on Sept. 2 before easing to $1,383/mt on Sept. 4. The increase was linked to stronger Dutch TTF gas prices and heightened geopolitical tensions in the Middle East.

The contrast illustrates an important difference between the two freight measures. Conventional freight scales primarily capture the underlying tanker freight market, whereas LNG-fuelled freight also carries direct exposure to bunker-price movements. When bunker costs and Worldscale points move in the same direction, the resulting LNG-equivalent freight can therefore move considerably faster than the conventional headline assessment.

For owners and charterers evaluating alternative-fuelled tonnage, that additional layer of bunker sensitivity can materially change the economics of a voyage even when the underlying tanker market has moved by a much smaller amount.