Screen-print style poster of an LNG carrier under a rising charter-rate curve

CASE STUDIES / CHARTERING · NOV 2​025

Charter rates swing portfolio P&L by millions.

A primer on how LNG time-charter economics work, then a worked portfolio showing exactly where rising freight forces diversions and where financial hedges take over.

$9.84M

WHAT SPOT FLEXIBILITY IS WORTH AT $70K/DAY CHARTER

View as slides (PDF) →

How the charter market prices a ship.

01 · THE MARKET

The time charter is the workhorse of LNG shipping: a rental agreement whose daily hire is set where vessel supply meets ton-mile demand. Rates move with the JKM-TTF-HH spreads, seasonality, outages and canal constraints, and they are inferred from indices rather than published deals.

WHO PAYS WHAT IN A TIME CHARTER

  • The charterer pays a daily hire plus voyage costs: fuel, ports, canal tolls, carbon
  • The owner provides the crew and covers OPEX: wages, maintenance, insurance
  • Performance warranties pin speed, fuel use and boil-off; EU-ETS duties are allocated

WHERE RATES COME FROM

  • Physical fixtures are private; Baltic Exchange and Spark publish daily reference rates
  • Broker and PRA reports circulate fixtures, bids and offers
  • ICE and CME list cash-settled freight futures and FFAs against those indices

CONTRACT TYPES: TIME CHARTER (MOST WIDESPREAD) · VOYAGE CHARTER · COA · BAREBOAT · DEAL FLOW: ENQUIRY, VETTING, RECAP, SUBJECTS LIFTED, CHARTER PARTY

The book behind the numbers.

02 · THE BOOK

A 12-month 2026 portfolio: US FOB length default-covers a Chinese DES short, with European and Asian spot outlets ready to absorb diversions. Two chartered 174k vessels move everything. The indexations are tuned to an indifference point at $20k a day: shipping to Asia and diverting to Europe earn exactly the same, so every rate move from there flips real decisions.

BREAKEVEN INPUTS: $20K/DAY CHARTER · DES SHORT ASIA JKM - $0.20 · SPOT EUROPE TTF - $0.29 · SPOT ASIA JKM + $0.32

THE WORKED PORTFOLIO · JAN TO DEC 2​026

FOB Long · Sabine Pass11 CARGOES · 115% HH + $4
DES Short · Shenzhen11 CARGOES · JKM - DISCOUNT
Spot · Zeebrugge / ShenzhenTTF - $0.29 / JKM + $0.32
Fleet2 x 174K · JAN TO DEC 2​026

P&L across the charter curve.

03 · THE SWEEP

The same book, run with and without spot flexibility, from $10k to $70k a day. Below roughly $40k both are identical and everything sails to Asia. Above $50k, diversions to Europe make the flexible book decline far more slowly; the rigid one crosses into losses at $70k.

$0M$10M$20M$30M$40M$10K$20K$30K$40K$50K$60K$70KAVERAGE CHARTER RATE · $/DAY · FULL-YEAR P&LBREAKEVEN ≈ $40K: BOOKS SEPARATESPOTNO SPOTSLOPE PER +$10K: -$5.14M WITH SPOT-$6.44M WITHOUT
FULL-YEAR P&L, RE-OPTIMISED PER RATE · CONSTANT ANNUAL CHARTER RATE, VALID $10K TO $70K/DAY · CHARTER COST ON ON-HIRE DAYS ONLY

What flexibility is worth, in dollars.

04 · THE PREMIUM

In per-MMBtu terms the flexible book never goes negative; the rigid one turns negative at $70k a day, -$0.04 per MMBtu. The dollar value of having spot outlets is zero up to $40k and grows sharply beyond it.

$0M$2.5M$5M$7.5M$10M$0AT $40K/DAY$2.67MAT $50K/DAY$6.50MAT $60K/DAY$9.84MAT $70K/DAYWHAT SPOT FLEXIBILITY IS WORTH · FULL-YEAR DELTA · $M
EXACT ENGINE DELTAS: $2,666,674 AT $50K · $6,495,719 AT $60K · $9,838,127 AT $70K

Freight futures take the wheel.

05 · THE HEDGE

Hedging the rigid book with the CME BLNG2-174 strip at 0 to 100% of on-hire ship-days flattens P&L against parallel curve shifts. At full ratio the book is flat at $0.57/MMBtu whatever freight does; the spot-enabled book is a partial natural hedge on its own, but no substitute for futures in a severe up-move.

-0.4-0.200.20.40.60.810.820.570.82-$15K/DAY0.570.570.53BASELINE0.330.570.39+$15K/DAY-0.280.570.08+$50K/DAYPARALLEL CHARTER-CURVE SHIFT VS BLNG2-174 STRIP · P&L $/MMBTU0%33%50%67%100% HEDGEDSPOT BOOK, NO FUTURES
FUTURES BASELINE $62,831/DAY (BLNG2-174, NOV 2​025) · HEDGE SIZED ON MONTHLY ON-HIRE SHIP-DAYS · INTERMEDIATE RATIOS LINEAR IN THE FUTURES PAYOFF

06 · THE VERDICT

Below about $40k a day, route everything to Asia:
above it, diversions and freight futures are what protect the book.

Operational flexibility and financial hedging are complements, not substitutes. Spot outlets soften the slope; the futures strip removes it. Where on that line a book should sit is a risk-appetite decision, and now a quantified one.

What covers freight risk, and when.

07 · TAKEAWAYS

✓

The breakeven sits near $40k a day

Below it both book variants are identical and every cargo sails US to China. Above roughly $50k the optimiser progressively diverts cargoes to Europe and covers the Chinese short from the Asian spot market.

✓

Spot flexibility is a partial natural hedge

It softens the P&L slope from -$6.44M to -$5.14M per +$10k/day, is worth $9.84M at $70k, and keeps the book from ever going negative where the rigid one hits -$0.04/MMBtu.

!

Flexibility does not replace futures in a spike

At a +$50k/day shift the unhedged rigid book is at -$0.28/MMBtu, the spot book only at $0.08. The 100% BLNG2-174 hedge stays flat at $0.57 whatever freight does; the right ratio is a risk-appetite decision.

Modelled with X-LNG.

08 · THE TOOL

1

Your world goes in

Contracts, vessels, charter rates, prices, spot assumptions and constraints. The full book, not a slice.

2

One optimal plan comes out

Feasible, P&L-maximising and constraint-compliant, re-solved for every scenario in minutes.

3

Every number checks out

Each result can be recalculated by hand. Transparency your risk committee can audit.

CLOUD-BASED, ANY PORTFOLIO SIZE · BUILT AND ADVANCED DAILY BY ~25 MATHEMATICIANS, PHYSICISTS AND COMPUTER SCIENTISTS