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Tuesday, 01 September 20
COVID-19 PUSHES US LNG INTO A TIGHT SPOT - DREWRY
The pandemic-led weak projections for economic growth will derail US LNG exports in full-year 2020 with the country also losing ground in the long term due to major delays in liquefaction projects.
US LNG exports were strong between 2017 and 2019, driven by the shale gas boom, rising demand for natural gas in Asia and higher global LNG prices. The US exported 3.9 million tonnes of LNG in 2016 which increased at a whopping 114% CAGR to 38.2 million tonnes in 2019.
The US is currently the third-largest global LNG exporter with six operational LNG export terminals aggregating 62 mtpa of liquefaction capacity and another 41 mtpa capacity under construction. Brownfiled projects such as Sabine Pass, Corpus Christi, Cameron LNG and Elba Island will reach their full capacities between 2020 and 2027 and greenfield projects such as Golden Pass LNG and Calcasieu Pass will become operational during the same period.
Existing LNG production capacity in the US has been impacted by the pandemic with over 110 LNG cargoes being cancelled by Asian and European customers during June-August due to the low LNG spot price which narrowed the US-Asia and US-Europe price arbitrage. Moreover, major US LNG importers – Japan, South Korea and Taiwan – have seen their LNG demand dwindling, while US-China LNG trade has not been able to pick up as some would have hoped. With projections for LNG spot prices below $5 per MMBtu over the next few years, we expect more cancellations to occur in the coming years making the US a ‘swing LNG producer.’
The ‘second wave’ of LNG liquefaction including mega-LNG projects (such as Driftwood LNG, Port Arthur LNG, Golden Pass, Calcasieu LNG, Plaquemines LNG, Magnolia LNG, Jordan Cove LNG and Rio Grande LNG) constitute over 160 mtpa of planned liquefaction capacity. These projects were initially expected to be operational by 2025, but are currently facing major trouble in securing funding and long-term supply deals required for reaching an FID. Only two projects (Golden Pass and Calcasieu Pass LNG) have attained the FID and have started construction, while over 10 major LNG liquefaction projects which were expected to reach the FID in 2020 have been delayed due to low LNG prices and weak economic growth projections.
The future for these projects looks uncertain as most of them had fixed the all-inclusive selling price for LNG at $8 per MMBtu for Asia ($2 for Henry Hub, $3 for liquefaction, $2-3 transportation) which is highly uncompetitive in the current market. Only a marginal recovery in LNG prices is projected for the next few years which further increases the woes for promoters of the planned projects in securing funding and supply deals. Meanwhile, a major competitor for US LNG, Qatar enjoys a break-even price below $2 per MMBtu as well as proximity to the Asian market. Qatar’s North Field Expansion (NFE) project’s Phase-1 (33 mtpa) and Phase-2 (16 mtpa) are also backed by the government, increasing the probability of their completion and in the process creating more trouble for the planned US projects.
The pandemic has already created severe financial woes for some US projects. For instance, a deal between Driftwood’s promoter Tellurian and India’s Petronet LNG fell through, raising doubts over the proposed 27.6 mtpa project. Although negotiations are still underway, Tellurian faces high competition from Russian and African projects. Shell has also exited the Lake Charles LNG project, increasing the uncertainty of the project for the other participants, while Magnolia LNG’s promoter LNG Ltd has been taken over by another entity after it went bankrupt, delaying the project further.
Some projects like Lake Charles and Rio Grande have gone back to the drawing board and plan to reduce trains to decrease the capex cost while others are cutting workforce and raising loans to keep their projects afloat. Most project developers are hopingfor an easing of US-China tensions and the prospect of securinga share of the rising LNG demand in China, which is projected to grow at over 10% CAGR between 2020 and 2025. However, China’s LNG importers may not be too keen on long-term supply deals with US companies given the current low prices and the uncertainty over US-China trade relations. Ties between China and Qatar are also strengthening with the latter reserving 16 LNG carrier newbuild berths at a Chinese shipyard.
Overall, project delays are expected to hurt the US deeply in the long term while other LNG producers – Qatar, Russia and Mozambique – gain from the narrowing supply-demand gap from 2023 onwards. Qatar has already reserved LNG carrier newbuilding berths at shipyards and has selected a technology partner for the NFE project while Russia’s Arctic LNG-2 is on schedule with added investments made for Arc-7 LNG carriers and large FSUs to keep the Northern Sea Route (NSR) active most of the year.
US LNG woes have had a cascading effect on the LNG shipping market, depressing charter rates. The fall in US-Asia LNG trade has negatively affected shipping demand which, along with cancellations, has increased vessel availability in the market. At present, the fall in charter rates is arrested by a rise in floating storage, but this situation is not sustainable in the long term with LNG prices remaining depressed and over 120 LNG carriers scheduled to be delivered during 2020-21.
An estimated 140 new orders for LNG carriers during 2020-23 would be left hanging if the planned US LNG projects fail to progress. The loss of orders will impact LNG shipyards which have already begun to reel under low orders (only eight vessels were ordered in 1H20). While project-linked ordering from Qatar, Russia and Mozambique will bring some respite the drying up of speculative orders will most certainly be a huge loss for the LNG shipping market as a whole.
To conclude US LNG exports will grow at a slower pace in the coming years as long-term supply deals have already been signed for the under-construction projects. However, stiff competition from other producers amid low LNG prices will impact their share in the Asian market. The fall in US-Asia trade will negatively impact shipping demand and further reduce the number of vessels required for LNG trade. Overall, we expect US LNG exports to be seasonal in the long run with Europe playing a much larger role in the future.
Source: Drewry
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Thursday, 10 September 20
U.S. COAL PRODUCTION IN 2020 TO BE 511 MMST, 28 PER CENT LOWER THAN IN 2019 - EIA
EIA expects total U.S. coal production in 2020 to be 511 million short tons (MMst), 194 MMst (28%) lower than in 2019. Mitigation efforts related t ...
Thursday, 10 September 20
DRY BULK SHIPPING: CHINA'S DEMAND KEEPING THE DRY BULK MARKET GOING - PETER SAND | BIMCO
Overview
An impressive recovery in Chinese dry bulk imports has protected the industry from the effects of falling demand in the rest of the wo ...
Thursday, 10 September 20
TANKER SHIPPING: FREIGHT RATES BACK AT LOSS-MAKING LEVELS AFTER 12 VERY PROFITABLE MONTHS - BIMCO
Overview
A stunningly strong 12 months for the tanker shipping industry is now being replaced by lower freight rates, as lower oil product ...
Thursday, 10 September 20
INDIA'S COAL IMPORTS STUMBLE IN AUGUST, RAISING RISK OF SLOW RECOVERY - REFINITIV | BANCHERO COSTA
After posting a mild recovery in July, India's coal imports have stumbled in August as the South Asian nation battles to restart it ...
Thursday, 10 September 20
THE FIRST 8 MONTHS OF 2020, INDONESIA EXPORTED 217.4 MLN TONNES OF COAL BASED ON REFINITIV - BANCHERO COSTA
The coal market has been hit by a weaker global economy as a result of COVID-19 pandemic and falling industrial electricity demand ...
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- Banpu Public Company Limited - Thailand
- Global Green Power PLC Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Coalindo Energy - Indonesia
- New Zealand Coal & Carbon
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- PetroVietnam Power Coal Import and Supply Company
- Kumho Petrochemical, South Korea
- Sree Jayajothi Cements Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PTC India Limited - India
- GAC Shipping (India) Pvt Ltd
- Manunggal Multi Energi - Indonesia
- Binh Thuan Hamico - Vietnam
- Jaiprakash Power Ventures ltd
- Gujarat Mineral Development Corp Ltd - India
- Barasentosa Lestari - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Orica Australia Pty. Ltd.
- Agrawal Coal Company - India
- Makarim & Taira - Indonesia
- Orica Mining Services - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Borneo Indobara - Indonesia
- Oldendorff Carriers - Singapore
- Energy Development Corp, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Karaikal Port Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- San Jose City I Power Corp, Philippines
- Grasim Industreis Ltd - India
- Commonwealth Bank - Australia
- Sakthi Sugars Limited - India
- Electricity Generating Authority of Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Mines - Canada
- Attock Cement Pakistan Limited
- Kepco SPC Power Corporation, Philippines
- Bharathi Cement Corporation - India
- Sical Logistics Limited - India
- Energy Link Ltd, New Zealand
- SN Aboitiz Power Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- LBH Netherlands Bv - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- Semirara Mining and Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Central Java Power - Indonesia
- The University of Queensland
- Metalloyd Limited - United Kingdom
- Rashtriya Ispat Nigam Limited - India
- Larsen & Toubro Limited - India
- Leighton Contractors Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- Parliament of New Zealand
- Xindia Steels Limited - India
- International Coal Ventures Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- GN Power Mariveles Coal Plant, Philippines
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- Riau Bara Harum - Indonesia
- Sinarmas Energy and Mining - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- VISA Power Limited - India
- Mercuria Energy - Indonesia
- PowerSource Philippines DevCo
- Offshore Bulk Terminal Pte Ltd, Singapore
- Maharashtra Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- CNBM International Corporation - China
- Eastern Coal Council - USA
- Port Waratah Coal Services - Australia
- Bayan Resources Tbk. - Indonesia
- MS Steel International - UAE
- Merrill Lynch Commodities Europe
- ICICI Bank Limited - India
- Posco Energy - South Korea
- SMC Global Power, Philippines
- Siam City Cement - Thailand
- Vedanta Resources Plc - India
- Bulk Trading Sa - Switzerland
- Intertek Mineral Services - Indonesia
- South Luzon Thermal Energy Corporation
- Rio Tinto Coal - Australia
- Australian Commodity Traders Exchange
- Mercator Lines Limited - India
- Coal and Oil Company - UAE
- Kideco Jaya Agung - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Globalindo Alam Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Directorate Of Revenue Intelligence - India
- Malabar Cements Ltd - India
- India Bulls Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Indo Tambangraya Megah - Indonesia
- Indonesian Coal Mining Association
- Petron Corporation, Philippines
- Romanian Commodities Exchange
- Meenaskhi Energy Private Limited - India
- Vizag Seaport Private Limited - India
- Bukit Makmur.PT - Indonesia
- Marubeni Corporation - India
- Coastal Gujarat Power Limited - India
- Indogreen Group - Indonesia
- Africa Commodities Group - South Africa
- Aditya Birla Group - India
- Wood Mackenzie - Singapore
- Central Electricity Authority - India
- Vijayanagar Sugar Pvt Ltd - India
- Trasteel International SA, Italy
- Baramulti Group, Indonesia
- Chamber of Mines of South Africa
- Indika Energy - Indonesia
- Semirara Mining Corp, Philippines
- Gujarat Electricity Regulatory Commission - India
- Salva Resources Pvt Ltd - India
- Electricity Authority, New Zealand
- Essar Steel Hazira Ltd - India
- GMR Energy Limited - India
- Savvy Resources Ltd - HongKong
- Edison Trading Spa - Italy
- IHS Mccloskey Coal Group - USA
- Kapuas Tunggal Persada - Indonesia
- GVK Power & Infra Limited - India
- Cement Manufacturers Association - India
- Simpson Spence & Young - Indonesia
- Singapore Mercantile Exchange
- Bahari Cakrawala Sebuku - Indonesia
- The State Trading Corporation of India Ltd
- Sindya Power Generating Company Private Ltd
- Antam Resourcindo - Indonesia
- Tamil Nadu electricity Board
- Ind-Barath Power Infra Limited - India
- Maheswari Brothers Coal Limited - India
- Georgia Ports Authority, United States
- PNOC Exploration Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- White Energy Company Limited
- Kohat Cement Company Ltd. - Pakistan
- Lanco Infratech Ltd - India
- Power Finance Corporation Ltd., India
- Parry Sugars Refinery, India
- Therma Luzon, Inc, Philippines
- London Commodity Brokers - England
- Indian Oil Corporation Limited
- Kalimantan Lumbung Energi - Indonesia
- Videocon Industries ltd - India
- Ministry of Transport, Egypt
- Interocean Group of Companies - India
- Deloitte Consulting - India
- Renaissance Capital - South Africa
- Pendopo Energi Batubara - Indonesia
- Samtan Co., Ltd - South Korea
- Karbindo Abesyapradhi - Indoneisa
- Straits Asia Resources Limited - Singapore
- Jindal Steel & Power Ltd - India
- Madhucon Powers Ltd - India
- IEA Clean Coal Centre - UK
- SMG Consultants - Indonesia
- Bukit Baiduri Energy - Indonesia
- Thai Mozambique Logistica
- Minerals Council of Australia
- Krishnapatnam Port Company Ltd. - India
- Sarangani Energy Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Uttam Galva Steels Limited - India
- Siam City Cement PLC, Thailand
- Mintek Dendrill Indonesia
- Wilmar Investment Holdings
- Sojitz Corporation - Japan
- Economic Council, Georgia
- Bangladesh Power Developement Board
- Planning Commission, India
- Toyota Tsusho Corporation, Japan
- Ambuja Cements Ltd - India
- Price Waterhouse Coopers - Russia
- Carbofer General Trading SA - India
- Timah Investasi Mineral - Indoneisa
- Independent Power Producers Association of India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Coal Blending Company Limited - Australia
- Star Paper Mills Limited - India
- Standard Chartered Bank - UAE
- Goldman Sachs - Singapore
- Meralco Power Generation, Philippines
- Australian Coal Association
- Bhatia International Limited - India
- OPG Power Generation Pvt Ltd - India
- Bhushan Steel Limited - India
- Ministry of Finance - Indonesia
- Iligan Light & Power Inc, Philippines
- Formosa Plastics Group - Taiwan
- Bhoruka Overseas - Indonesia
- Anglo American - United Kingdom
- Latin American Coal - Colombia
- Indian Energy Exchange, India
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Heidelberg Cement - Germany
- ASAPP Information Group - India
- Dalmia Cement Bharat India
- Aboitiz Power Corporation - Philippines
- Medco Energi Mining Internasional
- Eastern Energy - Thailand
- Mjunction Services Limited - India
- The Treasury - Australian Government
- Thiess Contractors Indonesia
- McConnell Dowell - Australia
- Tata Chemicals Ltd - India
- Gujarat Sidhee Cement - India
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