FLEX LNG said its long contract backlog would insulate it from falling rates in the near term, adding that a wave of older steam LNG carriers could be forced out of the market in years ahead.

Oslo- and NYSE-listed Flex said the freight market has come under pressure from high fleet growth, relatively small arbitrage between Europe and Asia, and lacklustre 1% LNG export volume growth. Marginal intra-month arbitrage has disincentivised floating storage, it added.

“We have seen spot rates behaving totally different from the seasonal norm in the fourth quarter, with spot rates for modern tonnage being pushed down to the $20,000s, where you effectively trade steam tonnage out of the market,” chief executive Oystein Kalleklev said.

Of the 202 steam-powered LNG carriers, 103 are aged 10-19 years, 68 are aged 20-29 years and 10 ships are 30 years or older. Flex said spot charter rates for steamers are now below operating costs even before drydocking, financing and administrative costs.

About 120 steamers are expected to be redelivered by the end of the decade, with about 75 in the next two years. These have an average age of 22 and suboptimal cargo capacity of around 140,000 cu m.

“The first mass EEXI-tinction in LNGC is near,” Flex warned in its earnings presentation, referring to the IMO’s carbon intensity index for existing ships.

Spot rates for modern two-stroke ships averaged $70,900 per day in 3Q24, down from $141,000 per day the same time last year. One-year time charter rates are around $50,000 per day and three-year time charters around $60,000 per day, or $80,000-$85,000 per day for five years or more.

Flex said it expected Donald Trump’s re-election to help the LNG market by lifting the pause on US export approvals, and easing curbs on oil and gas production.

But Trump’s hawkish stance on China — which buys large volumes of US LNG — and potential to introduce tariffs could have “complex implications for the LNG market”.

“The US-China relationship is deeply intertwined,” it said, as highlighted by ExxonMobil’s 20-year agreement with Guangdong Energy Group, which operates a 4m tonnes per year LNG import terminal in Guangdong province.

“Guangdong, one of China’s largest consumers of gas by province, has developed receiving facilities with a combined capacity of about 30m tonnes per year, underscoring its strategic importance in the LNG trade.”

Flex LNG sticks mostly to long-term contracts and so avoided the hit. Net profit for 3Q24 came in at $17.4m and adjusted net profit at $28.7m on revenue of $90.5m, in line with guidance. Adjusted earnings before interest, tax, depreciation and amortisation was $70.4m.

Flex’s average time charter equivalent rate was $75,426 per day, also in line with guidance.

It expects revenue to stay at a flat $90m in 4Q24 with just one of its ships, Flex Artemis (IMO: 9851634), exposed to spot rates through a variable time charter.

Flex LNG said it agreed with a supermajor to extend charters for carriers Flex Courageous (IMO: 9825439) and Flex Resolute (IMO: 9851646) to 2032, with the right to extend to 2039. Flex boasted a minimum charter backlog of 50 years, which could grow to 82 years if charterers used all their extension options.

Flex made cash proceeds of about $96.7m from refinancing deals for in the third quarter.

In October it sold and leased back its 2018-built Flex Endeavour (IMO: 9762261) netting $160m with a bareboat charter of approximately 10 years, with an option to buy the ship back at a fixed price after 8.5 years.

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