MISC Annual Report 2017

91 Strategy & Performance BUSINESS RISKS & MITIGATING ACTIONS Summary of Business Risks Mitigating Actions • The LNG shipping industry has evolved based on LNG customers’ requirements within an oversupplied gas market environment. • Shipping contracting term has shortened (seven to 10 years) resulting in the dearth of long-term contract opportunity that MISC is accustomed to. • In the absence of attractive long-term LNG shipping contracts, MISC started to develop capabilities in new LNG asset based solutions. • Entry of new and aggressive market participants have made the market highly competitive. • This, along with the oversupply of vessels in the market has impacted the rates negatively, lowering returns for the shipowners. • MISC focuses on building vessels backed by long-term contracts and is not involved in speculative newbuilds. • Our project returns are guided by a rigorous risk assessment framework. • Widening gap in charter rates between older steam engine propulsion vessels compared to dual fuel or tri fuel vessels. • Charterers are losing preference for steam vessels and more in favour of the latest design of LNG vessels which are bigger and have lower fuel consumption and boil-off rate. • MISC is investing in more efficient and modern tonnages befitting the current market demand. • Vessels with expired charter contracts are being repurposed for redeployment for alternative solutions e.g. FSUs. MANAGEMENT DISCUSSION & ANALYSIS Lng shipping