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Thursday, 21 January 21
LNG MARKET RIDING HIGH, BUT WILL THE GAINS CONTINUE? - DREWRY
The LNG market started 2021 on a high note with Asian spot prices crossing $30 per MMBtu while LNG shipping rates recorded a high $350k per day due to freezing temperatures and tight vessel supply. However, the current market conditions are poles apart from the supply-demand fundamentals with the market slated to be in super-backwardation.
Since October 2020, LNG prices have risen 300% to average $18.57 per MMBtu in January 2021 as some spot deals for end-January and early February have already been concluded in the range of $20-30 per MMBtu. The spur in Asian spot LNG prices has been so strong that it has surpassed the growth in Bitcoin value, highlighting just how ‘hot’ LNG has become as a commodity.
There are several factors that have contributed to the meteoric rise. First and foremost is lower-than-usual temperatures across Europe and Asia. While the former has tapped into its storage inventories with daily withdrawal rates reaching new highs, the latter has been taken by surprise with most of the countries ill-prepared to meet higher LNG demand for heating.
Second, the push from coal to gas in the power generation sector has further increased LNG demand in Asia, particularly in China and Japan. In China, landed LNG prices at terminals were recorded at $33 per MMBtu while prices for trucked LNG supplies have risen much higher. The government has further capped LNG usage in industrial and energy sectors with high gas shortages looming large. In Japan, the country’s inability to restore its nuclear power generation units after the Fukushima disaster a decade ago has increased its reliance on LNG for power generation. The Japanese government has encouraged voluntary cuts in power consumption with power prices reaching ¥250 per KWh (or $700 per MMBtu).
Both countries are scouring for LNG cargoes and are being forced to pay higher amounts. Some Japanese LNG buyers were also reported to be sucking LNG carriers empty instead of leaving behind the usual 5-10% to maintain tank temperature. The sky-high spot LNG prices have also forced other Asian countries such as India, Pakistan and Bangladesh to defer spot cargo procurement, raising worries of looming gas shortages in the countries. Furthermore, the surge in Asian LNG appetite has caused a diversion of Europe-bound cargoes to Asia and those from Russia to Asia through the Northern Sea even in icy January.
On the supply front, production issues in Australia, Qatar, Norway and the US coupled with lower production levels in other LNG exporting countries due to COVID-19 has squeezed the market to an extent in 2020. US LNG exports have risen since, with record exports in November and December. The current market is favouring US LNG exports to Asia with an extensive US-Asia price arbitrage. Henry Hub gas prices have been relatively stable at $2.70 per MMBtu while average Asian LNG spot prices were $18.57 per MMBtu. This translates to a netback of around $60-70 million, as a US LNG cargo bought at around $10 million is sold in Asia for $60-80 million.
In this respect it is worth noting that Nigeria LNG’s LNG Abalamabie is on its way to load from the US Freeport LNG terminal. The vessel is on the most expensive voyage after being chartered by BP for $350k per day and is expected to deliver cargo to Europe relieving a lower chartered vessel for an Asian delivery .
What lies ahead?
Cold temperatures are likely to extend to February and March keeping LNG demand high in Asia. However, congestion at the Panama Canal congestion is easing with more vessels moving from the US to Asia transiting through the Suez Canal. Meanwhile, LNG supply is expected to grow with Australia’s Prelude FLNG and Egypt’s Damietta LNG restarting in 1Q21
Therefore, Asian LNG prices are set to fall in 2Q21, but will be higher year on year supported by a boost in LNG imports from Asian countries which had deferred spot supplies due to an increase in prices. Also, European storage will be depleted by the end of winter, triggering many LNG cargoes moving towards the region.
The rise in LNG prices is beginning to stabilise with Asian spot futures for March deliveries at $9.47 per MMBtu. Over the summer, we expect LNG spot prices to average between $5 per MMBtu and $6 per MMBtu. The US-Asia spread will narrow in the coming months curtailing US LNG exports to the region and triggering cargo cancellations, albeit at a much lower level than the estimated 180 cargoes cancelled during the summer of 2020.
Meanwhile, LNG vessel supply will ease with 63 LNG carriers scheduled to be delivered in 2021 of which 31 are planned for 1Q21. Shipowners are trying to advance their vessel deliveries to take advantage of the ‘hot market’ with Flex LNG advancing the delivery of two of its vessels. Sinokor Merchant is also re-activating three of its laid-up steam turbine carriers for the spot market.
In a broader perspective, the current cold snap is expected to bring life to long-term contracting of LNG supply as countries will look to improve their preparedness for winter in addition to meet the higher LNG demand due to decarbonisation activities. This will also spur LNG project developers looking to reach FID in 2021-22. We believe the Panama Canal congestion will be less severe in 2021, but will worsen with rising US LNG exports which will choke the passage in the coming years. Therefore, LNG projects on the US West Coast, Mexico and Canada have an advantage over their East Coast counterparts as they would bypass the Panama Canal for shipping cargoes to Asia.
However, the major question is whether LNG prices will touch the same highs in the next winter season. The early outlook is negative, as we expect buyers to be better prepared for the next winter with a likely rise in floating cargoes. Nevertheless, LNG demand will grow at a faster pace, tightening the availability of LNG carriers next winter and thus raising shipping rates close to current levels. Prepare to see more long-term chartered newbuild orders in 2021.
Source: Drewry
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Wednesday, 07 April 21
KOMIPO ISSUED A TENDER FOR TOTAL 1,560,000 METRIC TONS OF BITUMINOUS COAL
COALspot.com: South Korea state-owned utility Korea Midland Power (KOMIPO) issued a tender for total 1,560,000 Metric Tons of Bituminous coal for i ...
Wednesday, 07 April 21
MARKET INSIGHT - INTERMODAL
Following the end of the catholic easter, during which the majority of shipping market participants were on holidays, it is interesting to note a f ...
Wednesday, 07 April 21
COAL USED TO GENERATE ELECTRIC POWER IN U.S. WILL INCREASE BY 13 PERCENT TO 495 MMST IN 2021 - EIA
EIA expects U.S. coal production to total 585 MMst in 2021, 46 MMst (9%) more than in 2020. In 2022, EIA expects coal production to grow by an addi ...
Wednesday, 31 March 21
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX UP 0.12 PCT - XINHUA
China Taiyuan coal transaction price index stood at 139.03 points Monday, up 0.12 percent week on week.
The index, released by China ...
Wednesday, 31 March 21
MARKET INSIGHT - INTERMODAL
Over the past week, the biggest story has been the blockage of the Suez Canal, as a result of the grounding of the container ship Ever Given. At th ...
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- Australian Coal Association
- Marubeni Corporation - India
- The Treasury - Australian Government
- Attock Cement Pakistan Limited
- Madhucon Powers Ltd - India
- Altura Mining Limited, Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kepco SPC Power Corporation, Philippines
- Minerals Council of Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Krishnapatnam Port Company Ltd. - India
- Semirara Mining and Power Corporation, Philippines
- Ministry of Finance - Indonesia
- Energy Link Ltd, New Zealand
- Edison Trading Spa - Italy
- SMC Global Power, Philippines
- Miang Besar Coal Terminal - Indonesia
- PTC India Limited - India
- Bulk Trading Sa - Switzerland
- GAC Shipping (India) Pvt Ltd
- Australian Commodity Traders Exchange
- Manunggal Multi Energi - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- White Energy Company Limited
- Jindal Steel & Power Ltd - India
- Kobexindo Tractors - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Therma Luzon, Inc, Philippines
- Price Waterhouse Coopers - Russia
- Orica Mining Services - Indonesia
- Africa Commodities Group - South Africa
- Ministry of Mines - Canada
- Videocon Industries ltd - India
- Rashtriya Ispat Nigam Limited - India
- LBH Netherlands Bv - Netherlands
- Aditya Birla Group - India
- Iligan Light & Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Sical Logistics Limited - India
- Baramulti Group, Indonesia
- Cement Manufacturers Association - India
- Thiess Contractors Indonesia
- Billiton Holdings Pty Ltd - Australia
- Merrill Lynch Commodities Europe
- Rio Tinto Coal - Australia
- Electricity Generating Authority of Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Mercator Lines Limited - India
- SN Aboitiz Power Inc, Philippines
- PowerSource Philippines DevCo
- Agrawal Coal Company - India
- Eastern Energy - Thailand
- Makarim & Taira - Indonesia
- Trasteel International SA, Italy
- The University of Queensland
- Neyveli Lignite Corporation Ltd, - India
- Larsen & Toubro Limited - India
- Kapuas Tunggal Persada - Indonesia
- Energy Development Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Electricity Authority, New Zealand
- Bukit Baiduri Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Samtan Co., Ltd - South Korea
- Antam Resourcindo - Indonesia
- Latin American Coal - Colombia
- Vedanta Resources Plc - India
- Meenaskhi Energy Private Limited - India
- Gujarat Sidhee Cement - India
- MS Steel International - UAE
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- New Zealand Coal & Carbon
- Tamil Nadu electricity Board
- Thai Mozambique Logistica
- Economic Council, Georgia
- Jaiprakash Power Ventures ltd
- ICICI Bank Limited - India
- Intertek Mineral Services - Indonesia
- IEA Clean Coal Centre - UK
- Georgia Ports Authority, United States
- TNB Fuel Sdn Bhd - Malaysia
- GN Power Mariveles Coal Plant, Philippines
- Toyota Tsusho Corporation, Japan
- Orica Australia Pty. Ltd.
- GVK Power & Infra Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Central Java Power - Indonesia
- Sree Jayajothi Cements Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Coal and Oil Company - UAE
- Grasim Industreis Ltd - India
- Mjunction Services Limited - India
- International Coal Ventures Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- GMR Energy Limited - India
- Indonesian Coal Mining Association
- Ind-Barath Power Infra Limited - India
- Sojitz Corporation - Japan
- Planning Commission, India
- Coalindo Energy - Indonesia
- London Commodity Brokers - England
- Siam City Cement PLC, Thailand
- Parliament of New Zealand
- Bayan Resources Tbk. - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Globalindo Alam Lestari - Indonesia
- Renaissance Capital - South Africa
- PNOC Exploration Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Siam City Cement - Thailand
- Gujarat Mineral Development Corp Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Port Waratah Coal Services - Australia
- Sindya Power Generating Company Private Ltd
- CNBM International Corporation - China
- Ceylon Electricity Board - Sri Lanka
- Singapore Mercantile Exchange
- Carbofer General Trading SA - India
- Tata Chemicals Ltd - India
- Barasentosa Lestari - Indonesia
- Central Electricity Authority - India
- Maharashtra Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- Goldman Sachs - Singapore
- South Luzon Thermal Energy Corporation
- Indian Energy Exchange, India
- IHS Mccloskey Coal Group - USA
- Mintek Dendrill Indonesia
- Coastal Gujarat Power Limited - India
- ASAPP Information Group - India
- Global Green Power PLC Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Power Finance Corporation Ltd., India
- Vizag Seaport Private Limited - India
- Wilmar Investment Holdings
- Kalimantan Lumbung Energi - Indonesia
- Meralco Power Generation, Philippines
- Petron Corporation, Philippines
- Salva Resources Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- OPG Power Generation Pvt Ltd - India
- Semirara Mining Corp, Philippines
- San Jose City I Power Corp, Philippines
- Malabar Cements Ltd - India
- Global Coal Blending Company Limited - Australia
- Borneo Indobara - Indonesia
- Bukit Makmur.PT - Indonesia
- Commonwealth Bank - Australia
- Sakthi Sugars Limited - India
- India Bulls Power Limited - India
- Bhoruka Overseas - Indonesia
- Kideco Jaya Agung - Indonesia
- Eastern Coal Council - USA
- Medco Energi Mining Internasional
- Cigading International Bulk Terminal - Indonesia
- McConnell Dowell - Australia
- Lanco Infratech Ltd - India
- Ambuja Cements Ltd - India
- Dalmia Cement Bharat India
- Metalloyd Limited - United Kingdom
- Bangladesh Power Developement Board
- Banpu Public Company Limited - Thailand
- Riau Bara Harum - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Romanian Commodities Exchange
- Indian Oil Corporation Limited
- European Bulk Services B.V. - Netherlands
- Heidelberg Cement - Germany
- Wood Mackenzie - Singapore
- VISA Power Limited - India
- Parry Sugars Refinery, India
- Karaikal Port Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Anglo American - United Kingdom
- Bhushan Steel Limited - India
- Kaltim Prima Coal - Indonesia
- Xindia Steels Limited - India
- Alfred C Toepfer International GmbH - Germany
- Sinarmas Energy and Mining - Indonesia
- SMG Consultants - Indonesia
- Aboitiz Power Corporation - Philippines
- Standard Chartered Bank - UAE
- Bhatia International Limited - India
- Formosa Plastics Group - Taiwan
- AsiaOL BioFuels Corp., Philippines
- Straits Asia Resources Limited - Singapore
- Posco Energy - South Korea
- Star Paper Mills Limited - India
- Directorate Of Revenue Intelligence - India
- Bharathi Cement Corporation - India
- TeaM Sual Corporation - Philippines
- Deloitte Consulting - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Independent Power Producers Association of India
- Essar Steel Hazira Ltd - India
- Indo Tambangraya Megah - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- PetroVietnam Power Coal Import and Supply Company
- Sarangani Energy Corporation, Philippines
- Chamber of Mines of South Africa
- Oldendorff Carriers - Singapore
- Chettinad Cement Corporation Ltd - India
- Indika Energy - Indonesia
- Ministry of Transport, Egypt
- Kumho Petrochemical, South Korea
- Mercuria Energy - Indonesia
- The State Trading Corporation of India Ltd
- Timah Investasi Mineral - Indoneisa
- Global Business Power Corporation, Philippines
- Indogreen Group - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- Interocean Group of Companies - India
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