The liquefied natural gas (LNG)<a href="https://www.thenationalnews.com/business/energy/2024/11/07/adnoc-ls-has-signed-44bn-in-contracts-to-build-23-supertankers-this-year/" target="_blank"> shipping market</a> is set to tighten capacity by the end of 2027, as ageing vessels are retired and fuel supplies grow, which in turn could push up freight rates, a senior executive from <a href="https://www.thenationalnews.com/business/energy/2024/11/07/adnoc-ls-has-signed-44bn-in-contracts-to-build-23-supertankers-this-year/" target="_blank">Adnoc Logistics and Services </a>(L&S) has said. The current weak <a href="https://www.thenationalnews.com/business/2024/05/08/adnoc-ls-profits-surge-34-on-higher-demand-for-logistics-and-shipping/" target="_blank">freight rates</a> in the LNG shipping market will squeeze out older vessels and the new fleet being added largely targets existing supply, Nicholas Gleeson, chief financial officer of Adnoc L&S, told <i>The National.</i> “In the medium and long term, outlook for LNG remains extremely strong," he said. "There's going to be this period for a year or so where we have an oversupply of vessels and that's resulting in significantly weaker rates since the end of last year." Global LNG markets are heading towards an unprecedented glut, as new projects drive a surge in supply, primarily from Qatar and the US, along with contributions from emerging LNG-producing countries. However, LNG freight prices were falling last year, as strong fleet growth surpassed liquefaction capacity additions. Rates in the Atlantic and Pacific Basin were at about $19,500 per day and $23,000 per day, respectively, in late November, compared with $190,000 per day and $200,000 a day a year ago, said Platts, part of S&P Global Commodity Insights. “The hope is that those weaker rates will drive some of the older, less environmentally efficient assets out of the fleet permanently, which would contribute to even stronger tightening by the end of 2026 or during 2027, when we see the additional capacity coming online from new LNG projects,” Mr Gleeson said. In November, Adnoc’s maritime unit, which has been expanding its fleet, took delivery of the first of six newly built LNG carriers from the Jiangnan Shipyard in China. The vessel was delivered two months ahead of schedule, with the remaining five expected to be delivered this year and the next. In 2024, the company awarded contracts for up to 23 new “energy-efficient” ships, including LNG carriers, very large ethane carriers (VLECs) and very large ammonia carriers (VLACs). The market for tankers, which typically haul crude oil and associated products, as well as dry bulk, remained “soft” in the fourth quarter and is expected to remain subdued this year, though there are signs of some “green shoots”, Mr Gleeson said. Demand in the tanker segment is being driven by a continuing shift towards the Americas as a source of crude oil and product supply, he added. The stepping up of US sanctions on vessels transporting Iranian and Russian crude is expected to tighten the shipping market. This week, Shandong Port Group banned tankers under US sanctions from calling at its ports in the eastern Chinese province, a move that could reduce imports for China’s independent refineries, key buyers of discounted crude from Iran, Russia and Venezuela. More than 100 vessels linked to Iranian crude trade since 2018 have been subject to sanctioned, representing 60 per cent of Iran’s global exports and 50 per cent of China’s imports in the past three months, a Goldman Sachs report said last week. “Any sort of geographic or geopolitical disruption tends to be positive for the shipping industry because it results in people using sub optimal routes,” Mr Gleeson said. “We don't always love it because it adds complexity … but we do ultimately see a benefit to charter rates when there's any sort of geopolitical tension that disrupts access to existing routes." Adnoc L&S is still closely monitoring the situation in the Red Sea, where attacks by Yemen's Houthi militia group have been disrupting the movement of commercial ships for more than a year. “We still look at it every single day and we avoid transiting what we regard as the high-risk zones,” Mr Gleeson said. Ships run by Adnoc L&S and other operators are taking the longer route around the Cape of Good Hope, avoiding the Bab Al Mandeb, he added. “It would require an exceptional approval with an exceptional reason for us to transit any of the high-risk zones.” Using various types of weapons, the Houthis have so far conducted more than 100 attacks on commercial vessels and warships in the vital maritime trading route since November 2023, the Washington Institute for Near East Policy said in a report last month. Adnoc L&S, which completed the acquisition of an 80 per cent stake in Navig8 Topco Holdings this week, will pursue more mergers and acquisitions as it grows its integrated logistics and deep sea shipping operations, Mr Gleeson said. “We expect to continue growing in deep sea energy shipping," he said. "There's a lot of potential demand coming up, some of that through the Adnoc ecosystem, which we're obviously very well tapped into. But some is coming through the other customer channels that we've developed internationally.” The deal with Navig8, valued at $1.04 billion, is estimated to boost Adnoc L&S’ earnings per share by at least 20 per cent in 2025 compared with last year. Adnoc L&S will acquire the remaining 20 per cent stake in the company in mid-2027 for deferred consideration of between $335 million and $450 million, depending on Navig8's core earnings performance between now and then. Navig8, a global shipping pool operator, owns a fleet of 32 tankers and has a presence in 15 cities across the world. “The idea of taking 80 per cent upfront is that we keep the existing shareholders … actively motivated to continue driving that business at least until the mid-2027, when we take full ownership of the business,” Mr Gleeson said.