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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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Friday, 15 January 21
OVER US$50 BILLION IN GAS POWER PROJECTS AND LNG IMPORT FACILITIES AT RISK OF CANCELLATION IN BANGLADESH, PAKISTAN AND VIETNAM - IEEFA
Pakistan and Bangladesh have already cancelled tenders for LNG imports
Emerging markets such as Vietnam, Pakistan and Bangladesh tha ...
Friday, 15 January 21
VIETNAM'S EXTRAORDINARY ROOFTOP SOLAR SUCCESS DEALS ANOTHER BLOW TO THE REMAINING COAL PIPELINE - IEEFA
9.3 gigawatts peak of solar capacity, equal to 6 coal power plants, installed in less than a year
Vietnam’s solar power indust ...
Friday, 15 January 21
CHINA'S BENCHMARK POWER COAL PRICE EDGES UP - XINHUA
China’s benchmark power coal price rose slightly during the past week.
The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge of ...
Thursday, 14 January 21
KOREA MIDLAND POWER INVITED BIDS FOR AUSTRALIAN COAL FOR THREE YEARS SUPPLY
COALspot.com: Korea Midland Power Co. Ltd, issued an International tender for total 1,560,000 MT of Min.5,700 kcal/kg NCV coal of Australian Origin ...
Wednesday, 13 January 21
CHINA THERMAL GENCO PROFITS FACE PRESSURE AMID POWER SHORTAGES - FITHCH WIRE
High coal and gas prices will put near-term pressure on margins for thermal power generators in China, says Fitch Ratings. However, the power short ...
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- Kartika Selabumi Mining - Indonesia
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- Wood Mackenzie - Singapore
- Xindia Steels Limited - India
- Edison Trading Spa - Italy
- Kohat Cement Company Ltd. - Pakistan
- Central Electricity Authority - India
- Semirara Mining and Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Makarim & Taira - Indonesia
- European Bulk Services B.V. - Netherlands
- Thai Mozambique Logistica
- Petrochimia International Co. Ltd.- Taiwan
- Economic Council, Georgia
- Thiess Contractors Indonesia
- IHS Mccloskey Coal Group - USA
- Grasim Industreis Ltd - India
- CIMB Investment Bank - Malaysia
- Port Waratah Coal Services - Australia
- Oldendorff Carriers - Singapore
- AsiaOL BioFuels Corp., Philippines
- Ceylon Electricity Board - Sri Lanka
- Orica Australia Pty. Ltd.
- India Bulls Power Limited - India
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- Siam City Cement PLC, Thailand
- Larsen & Toubro Limited - India
- Meralco Power Generation, Philippines
- Orica Mining Services - Indonesia
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- Sree Jayajothi Cements Limited - India
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- Bank of Tokyo Mitsubishi UFJ Ltd
- The University of Queensland
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- Neyveli Lignite Corporation Ltd, - India
- PowerSource Philippines DevCo
- GAC Shipping (India) Pvt Ltd
- Videocon Industries ltd - India
- Bharathi Cement Corporation - India
- Simpson Spence & Young - Indonesia
- Malabar Cements Ltd - India
- Bukit Makmur.PT - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Asmin Koalindo Tuhup - Indonesia
- Renaissance Capital - South Africa
- Lanco Infratech Ltd - India
- Directorate Of Revenue Intelligence - India
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- SMG Consultants - Indonesia
- Posco Energy - South Korea
- Interocean Group of Companies - India
- Coalindo Energy - Indonesia
- Electricity Authority, New Zealand
- Formosa Plastics Group - Taiwan
- Goldman Sachs - Singapore
- Madhucon Powers Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Indo Tambangraya Megah - Indonesia
- Banpu Public Company Limited - Thailand
- Standard Chartered Bank - UAE
- McConnell Dowell - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- Chamber of Mines of South Africa
- The Treasury - Australian Government
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Africa Commodities Group - South Africa
- Karaikal Port Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Trasteel International SA, Italy
- Straits Asia Resources Limited - Singapore
- Miang Besar Coal Terminal - Indonesia
- Ministry of Mines - Canada
- PetroVietnam Power Coal Import and Supply Company
- Bhushan Steel Limited - India
- Pendopo Energi Batubara - Indonesia
- Tamil Nadu electricity Board
- Bangladesh Power Developement Board
- Mjunction Services Limited - India
- Siam City Cement - Thailand
- Karbindo Abesyapradhi - Indoneisa
- Global Green Power PLC Corporation, Philippines
- VISA Power Limited - India
- Parliament of New Zealand
- Kepco SPC Power Corporation, Philippines
- Jindal Steel & Power Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Independent Power Producers Association of India
- Savvy Resources Ltd - HongKong
- Dalmia Cement Bharat India
- Anglo American - United Kingdom
- Ind-Barath Power Infra Limited - India
- Bhoruka Overseas - Indonesia
- Therma Luzon, Inc, Philippines
- Deloitte Consulting - India
- Kaltim Prima Coal - Indonesia
- Global Coal Blending Company Limited - Australia
- Uttam Galva Steels Limited - India
- TeaM Sual Corporation - Philippines
- Parry Sugars Refinery, India
- Ministry of Finance - Indonesia
- Essar Steel Hazira Ltd - India
- Ministry of Transport, Egypt
- Wilmar Investment Holdings
- Central Java Power - Indonesia
- Coastal Gujarat Power Limited - India
- Indonesian Coal Mining Association
- Altura Mining Limited, Indonesia
- Sarangani Energy Corporation, Philippines
- Eastern Energy - Thailand
- Semirara Mining Corp, Philippines
- CNBM International Corporation - China
- Samtan Co., Ltd - South Korea
- Kalimantan Lumbung Energi - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Meenaskhi Energy Private Limited - India
- PNOC Exploration Corporation - Philippines
- Sojitz Corporation - Japan
- Gujarat Mineral Development Corp Ltd - India
- Bukit Baiduri Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Energy Development Corp, Philippines
- New Zealand Coal & Carbon
- Cigading International Bulk Terminal - Indonesia
- Agrawal Coal Company - India
- Barasentosa Lestari - Indonesia
- Indogreen Group - Indonesia
- Star Paper Mills Limited - India
- Metalloyd Limited - United Kingdom
- Price Waterhouse Coopers - Russia
- San Jose City I Power Corp, Philippines
- Sindya Power Generating Company Private Ltd
- Mercuria Energy - Indonesia
- Mintek Dendrill Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- OPG Power Generation Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Salva Resources Pvt Ltd - India
- Vizag Seaport Private Limited - India
- ICICI Bank Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Electricity Generating Authority of Thailand
- Aditya Birla Group - India
- Billiton Holdings Pty Ltd - Australia
- Kideco Jaya Agung - Indonesia
- Maheswari Brothers Coal Limited - India
- Toyota Tsusho Corporation, Japan
- Indian Oil Corporation Limited
- Georgia Ports Authority, United States
- Romanian Commodities Exchange
- Heidelberg Cement - Germany
- Planning Commission, India
- MS Steel International - UAE
- Krishnapatnam Port Company Ltd. - India
- Gujarat Sidhee Cement - India
- Kapuas Tunggal Persada - Indonesia
- Rio Tinto Coal - Australia
- Kumho Petrochemical, South Korea
- Petron Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- IEA Clean Coal Centre - UK
- Marubeni Corporation - India
- Carbofer General Trading SA - India
- Kobexindo Tractors - Indoneisa
- Tata Chemicals Ltd - India
- Borneo Indobara - Indonesia
- Cement Manufacturers Association - India
- Power Finance Corporation Ltd., India
- Indian Energy Exchange, India
- Gujarat Electricity Regulatory Commission - India
- GVK Power & Infra Limited - India
- Iligan Light & Power Inc, Philippines
- ASAPP Information Group - India
- Antam Resourcindo - Indonesia
- Singapore Mercantile Exchange
- Energy Link Ltd, New Zealand
- Riau Bara Harum - Indonesia
- Sical Logistics Limited - India
- Mercator Lines Limited - India
- Global Business Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Australian Coal Association
- London Commodity Brokers - England
- Medco Energi Mining Internasional
- Indika Energy - Indonesia
- Eastern Coal Council - USA
- Attock Cement Pakistan Limited
- Alfred C Toepfer International GmbH - Germany
- Jaiprakash Power Ventures ltd
- Maharashtra Electricity Regulatory Commission - India
- LBH Netherlands Bv - Netherlands
- Latin American Coal - Colombia
- Manunggal Multi Energi - Indonesia
- White Energy Company Limited
- Timah Investasi Mineral - Indoneisa
- SN Aboitiz Power Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Minerals Council of Australia
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- PTC India Limited - India
- Bhatia International Limited - India
- International Coal Ventures Pvt Ltd - India
- Australian Commodity Traders Exchange
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