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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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- Cigading International Bulk Terminal - Indonesia
- Central Java Power - Indonesia
- Star Paper Mills Limited - India
- Price Waterhouse Coopers - Russia
- Medco Energi Mining Internasional
- Bhushan Steel Limited - India
- Mintek Dendrill Indonesia
- Bhatia International Limited - India
- Malabar Cements Ltd - India
- Agrawal Coal Company - India
- Kumho Petrochemical, South Korea
- Global Green Power PLC Corporation, Philippines
- Petron Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bayan Resources Tbk. - Indonesia
- Riau Bara Harum - Indonesia
- Parry Sugars Refinery, India
- Ind-Barath Power Infra Limited - India
- Chamber of Mines of South Africa
- Ceylon Electricity Board - Sri Lanka
- Therma Luzon, Inc, Philippines
- Central Electricity Authority - India
- Aditya Birla Group - India
- Makarim & Taira - Indonesia
- Tata Chemicals Ltd - India
- Electricity Authority, New Zealand
- Bukit Asam (Persero) Tbk - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vizag Seaport Private Limited - India
- Siam City Cement - Thailand
- OPG Power Generation Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Mjunction Services Limited - India
- Leighton Contractors Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- PetroVietnam Power Coal Import and Supply Company
- SMG Consultants - Indonesia
- Standard Chartered Bank - UAE
- Neyveli Lignite Corporation Ltd, - India
- Maheswari Brothers Coal Limited - India
- CNBM International Corporation - China
- Kapuas Tunggal Persada - Indonesia
- Romanian Commodities Exchange
- Coal and Oil Company - UAE
- Sree Jayajothi Cements Limited - India
- SMC Global Power, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Eastern Energy - Thailand
- Indian Energy Exchange, India
- South Luzon Thermal Energy Corporation
- Kideco Jaya Agung - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bulk Trading Sa - Switzerland
- Singapore Mercantile Exchange
- New Zealand Coal & Carbon
- International Coal Ventures Pvt Ltd - India
- Interocean Group of Companies - India
- Electricity Generating Authority of Thailand
- Heidelberg Cement - Germany
- Anglo American - United Kingdom
- Planning Commission, India
- Bhoruka Overseas - Indonesia
- Bangladesh Power Developement Board
- Marubeni Corporation - India
- Barasentosa Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Bukit Makmur.PT - Indonesia
- Cement Manufacturers Association - India
- Rio Tinto Coal - Australia
- White Energy Company Limited
- Attock Cement Pakistan Limited
- Intertek Mineral Services - Indonesia
- Miang Besar Coal Terminal - Indonesia
- The Treasury - Australian Government
- AsiaOL BioFuels Corp., Philippines
- ICICI Bank Limited - India
- Goldman Sachs - Singapore
- Indika Energy - Indonesia
- Wilmar Investment Holdings
- Carbofer General Trading SA - India
- Kepco SPC Power Corporation, Philippines
- Borneo Indobara - Indonesia
- Kartika Selabumi Mining - Indonesia
- Aboitiz Power Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- Minerals Council of Australia
- Renaissance Capital - South Africa
- Iligan Light & Power Inc, Philippines
- Uttam Galva Steels Limited - India
- Essar Steel Hazira Ltd - India
- Independent Power Producers Association of India
- Thiess Contractors Indonesia
- Siam City Cement PLC, Thailand
- Maharashtra Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Samtan Co., Ltd - South Korea
- Sarangani Energy Corporation, Philippines
- Deloitte Consulting - India
- Edison Trading Spa - Italy
- Merrill Lynch Commodities Europe
- Manunggal Multi Energi - Indonesia
- Directorate Of Revenue Intelligence - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kohat Cement Company Ltd. - Pakistan
- PNOC Exploration Corporation - Philippines
- IEA Clean Coal Centre - UK
- Karaikal Port Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- London Commodity Brokers - England
- Jorong Barutama Greston.PT - Indonesia
- Pendopo Energi Batubara - Indonesia
- Chettinad Cement Corporation Ltd - India
- VISA Power Limited - India
- Africa Commodities Group - South Africa
- Kaltim Prima Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Gujarat Sidhee Cement - India
- Parliament of New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Coalindo Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Ministry of Mines - Canada
- Meralco Power Generation, Philippines
- Vedanta Resources Plc - India
- Lanco Infratech Ltd - India
- Tamil Nadu electricity Board
- Indian Oil Corporation Limited
- Commonwealth Bank - Australia
- Directorate General of MIneral and Coal - Indonesia
- PTC India Limited - India
- San Jose City I Power Corp, Philippines
- Mercator Lines Limited - India
- Rashtriya Ispat Nigam Limited - India
- Australian Coal Association
- Krishnapatnam Port Company Ltd. - India
- Meenaskhi Energy Private Limited - India
- Alfred C Toepfer International GmbH - Germany
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indo Tambangraya Megah - Indonesia
- Mercuria Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- Indonesian Coal Mining Association
- The State Trading Corporation of India Ltd
- Semirara Mining and Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Semirara Mining Corp, Philippines
- Orica Mining Services - Indonesia
- CIMB Investment Bank - Malaysia
- Georgia Ports Authority, United States
- GN Power Mariveles Coal Plant, Philippines
- McConnell Dowell - Australia
- GMR Energy Limited - India
- Coastal Gujarat Power Limited - India
- GVK Power & Infra Limited - India
- SN Aboitiz Power Inc, Philippines
- ASAPP Information Group - India
- Globalindo Alam Lestari - Indonesia
- Banpu Public Company Limited - Thailand
- Xindia Steels Limited - India
- Sindya Power Generating Company Private Ltd
- MS Steel International - UAE
- Australian Commodity Traders Exchange
- Jaiprakash Power Ventures ltd
- Grasim Industreis Ltd - India
- Metalloyd Limited - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- LBH Netherlands Bv - Netherlands
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Finance - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Holcim Trading Pte Ltd - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Trasteel International SA, Italy
- Bahari Cakrawala Sebuku - Indonesia
- Sakthi Sugars Limited - India
- Altura Mining Limited, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- India Bulls Power Limited - India
- Gujarat Electricity Regulatory Commission - India
- PowerSource Philippines DevCo
- Posco Energy - South Korea
- Ambuja Cements Ltd - India
- The University of Queensland
- Power Finance Corporation Ltd., India
- Eastern Coal Council - USA
- Energy Development Corp, Philippines
- Larsen & Toubro Limited - India
- Orica Australia Pty. Ltd.
- IHS Mccloskey Coal Group - USA
- Sical Logistics Limited - India
- Ministry of Transport, Egypt
- Baramulti Group, Indonesia
- Port Waratah Coal Services - Australia
- Formosa Plastics Group - Taiwan
- Asmin Koalindo Tuhup - Indonesia
- Salva Resources Pvt Ltd - India
- Dalmia Cement Bharat India
- Madhucon Powers Ltd - India
- Wood Mackenzie - Singapore
- TeaM Sual Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- Antam Resourcindo - Indonesia
- Economic Council, Georgia
- Sojitz Corporation - Japan
- Billiton Holdings Pty Ltd - Australia
- Indogreen Group - Indonesia
- Latin American Coal - Colombia
- Oldendorff Carriers - Singapore
- Simpson Spence & Young - Indonesia
- Jindal Steel & Power Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thai Mozambique Logistica
- Pipit Mutiara Jaya. PT, Indonesia
- Toyota Tsusho Corporation, Japan
- Bharathi Cement Corporation - India
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