The LNG shipping sector is entering a recovery cycle, with spot rates exceeding $150,000 per day for the first time since the end of 2024, as noted. This transforms the recent major risk into a significant opportunity. The sector has the potential to deliver substantial profits through at least through Q1 2026, driven by rising spot rates. Especially companies with vessels on the spot market.
Currently, two pure LNG shippers listed on US stock exchanges have some vessels on the spot market. These are Capital Clean Energy Carriers Corp. (NYQ: CCEC) and FLEX LNG (NYSE: FLNG). Other publicly traded companies include Norway’s ALNG (OSE: ALNG) on the Oslo Stock Exchange, and Dynagas LNG Partners (NYSE: DLNG) and Cool Company Ltd (CoolCo) (NYSE: CLCO), listed in the US. DLNG has long-term contracts, and CLCO will be delisted at around the end of the year.
A Brief Review
It has been a challenging year. At the beginning, scepticism prevailed due to 1) delays in new liquefaction terminals and 2) concerns about an oversupply of new vessels for which there would be no contracts. This would push both spot rates and long-term contracts down, hurting the revenues of LNG shipping companies. The price of the newbuilds stands at around $260 million.
Some, such as Oystein Kalleklev, the former CEO of Flex LNG, already saw an opportunity to rejuvenate the global fleet by replacing the first-generation tankers, which are at the end of their construction lives. The following quotes are from the FLNG earnings call for Q3-2024:
“These ships are now technically and commercially obsolete, and we do think scrapping activity will take up, and which we do think will rebalance the market in 2027.” (…) “With all these steamships coming off charters, in this kind of market balance we assume 53 of the 75 ships to be removed from the market. This could be more if the market stays soft. It’s very expensive to take a steamship through a 25-year special survey”, Oystein Kalleklev, CEO, Flex LNG
However, pessimism prevailed, fueled by falling spot rates. The UP World LNG Shipping Index (UP-Indices.com) reflects this scepticism, as its return over the past twelve months is only 0.18%. The chart below compares the UPI and the S&P 500 index.
Why Low Rates Drove The Recovery
Paradoxically, those brutally low spot rates are now driving the recovery. Short- and long-term rates vary by carrier type, defined by age, propulsion, and capacity. I discussed the individual types in an earlier article, so I will only briefly mention here that the younger the ship, the more efficient it is in terms of fuel consumption, speed, and delivered volume. And the older the ship, the higher its operating costs and break-even point.
In November 2024, the spot prices for steam vessels, or first-generation vessels, were as low as $6,750, while fourth-generation vessels were priced at $20,250 (source: Splash247).
Two graphs from the Cool Company (NYSE: CLCO) Q2-2025 presentation compare the third (TFDE) and fourth (MEGI/MEGA/X-DF) generations of LNG tankers. Note the black line showing 2025 spot prices, which shows the difference. In 2023, there was a significant difference between vessel types, but by 2024, this disparity had vanished. The trend continued consistently for all types each year.
Steam tankers became unprofitable due to low rates and were either scrapped or left idle. Some of them were converted into floating liquefaction vessels (FLNG) or floating storage and offloading vessels (FSO).
Since the summer, falling and low spot rates have ceased to be a threat and have risen sharply now: Spot rates are no longer a threat, but an opportunity.
This applies to contemporary vessels. From an investor’s perspective, limiting the number of vessels in the spot market can enhance the fleet’s revenues under long-term contracts.
Long-term contracts have remained at around $80,000 per day, and according to a Q3-25 earnings call with Capital Clean Energy Carriers, they are even higher:
“Latest generation two-stroke vessels from 2027 and 2028 are in the very high 80s to low 90s range”, Nikolaos Tripodakis, CCO Capital Clean Energy Carriers.
Supply And Demand: The Fundamentals Are Improving
Delays in constructing new onshore liquefaction units have mostly been resolved this year. Both consumption (imports) and production (exports) are increasing. The USA continues to grow its exports, and Europe continues to expand its imports, replacing gas – and finally LNG – from Russia.
New liquefaction units, especially in the USA and Qatar, will be launched over the next two or three years, adding a massive amount of LNG.
The withdrawal of older vessels addresses concerns about an oversupply of new tankers; however, there will still be significant deliveries in the next two years. Most of these new vessels are already under contract, primarily due to Qatar´s North Field LNG project. Notably, Qatar Energy serves as the initial buyer, and these vessels are then tendered to new owners, such as companies from Japan and Greece. The following graph shows that only a small percentage of vessels are currently without contracts.
Conclusion
The recovery in the LNG market is spreading to the maritime transport sector, with the decommissioning of old tankers continuing. Spot rates are rising, and the peak season is approaching, which will last until the first quarter of next year. This brings hope that both companies will perform better than in the rest of the year, thanks to spot vessels.