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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, 13 January 21
COAL TO BE BIGGEST CONTRIBUTOR TO INDIA'S $5 TRILLION ECONOMY: AMIT SHAH - BUSINESS STANDARD
The Centre on Monday awarded the letter of allocation to successful bidders of coal mines under the commercial auction held during October-November ...
Monday, 11 January 21
MUTED COAL RECOVERY IN 2021 - BALTIC EXCHANGE
Coal demand is expected to rebound in 2021
Medium-term outlook is less favourable although demand declines are expected to be subtle ...
Sunday, 10 January 21
KOREAN GENCOS INVITED BIDS FOR TOTAL 880,000 TONS OF COAL FOR MARCH 2021 LOADING
COALspot.com: Korea South-East Power Co., Ltd. (KOEN), on behalf of EWP, KOSPO, KOSEP and KOWEPO issued an international tender for total 880 ...
Friday, 08 January 21
INDIA COULD COMPETE AGAINST CHINA IN SOLAR MODULE PRODUCTION WITH THE RIGHT GOVERNMENT SUPPORT - IEEFA
The focus should be on helping manufacturers become globally competitive
Although one of the top 10 solar module producers in the world, India ...
Thursday, 07 January 21
FITCH FORECASTS DOUBLING IN ASIAN WIND, SOLAR CAPACITY BY 2029, TOPPING 1,500GW
Despite some near-term delays due to the Covid-19 pandemic, solar power and offshore wind will drive steep growth in non-hydro renewables in Asia, ...
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- Aditya Birla Group - India
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- White Energy Company Limited
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- Makarim & Taira - Indonesia
- Price Waterhouse Coopers - Russia
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- TNB Fuel Sdn Bhd - Malaysia
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- PowerSource Philippines DevCo
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- Coalindo Energy - Indonesia
- Romanian Commodities Exchange
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- SN Aboitiz Power Inc, Philippines
- Bangladesh Power Developement Board
- GVK Power & Infra Limited - India
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- Ministry of Transport, Egypt
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- Petrochimia International Co. Ltd.- Taiwan
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- GN Power Mariveles Coal Plant, Philippines
- Riau Bara Harum - Indonesia
- Australian Coal Association
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- San Jose City I Power Corp, Philippines
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- Deloitte Consulting - India
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- Altura Mining Limited, Indonesia
- Leighton Contractors Pty Ltd - Australia
- Trasteel International SA, Italy
- Indonesian Coal Mining Association
- Sojitz Corporation - Japan
- Rashtriya Ispat Nigam Limited - India
- Tamil Nadu electricity Board
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- Anglo American - United Kingdom
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- Salva Resources Pvt Ltd - India
- SMG Consultants - Indonesia
- Eastern Coal Council - USA
- SMC Global Power, Philippines
- Savvy Resources Ltd - HongKong
- Jorong Barutama Greston.PT - Indonesia
- London Commodity Brokers - England
- Offshore Bulk Terminal Pte Ltd, Singapore
- Singapore Mercantile Exchange
- Directorate Of Revenue Intelligence - India
- Global Business Power Corporation, Philippines
- ASAPP Information Group - India
- Bukit Baiduri Energy - Indonesia
- Ambuja Cements Ltd - India
- Essar Steel Hazira Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Coal and Oil Company - UAE
- Metalloyd Limited - United Kingdom
- Jaiprakash Power Ventures ltd
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- Orica Mining Services - Indonesia
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- Kapuas Tunggal Persada - Indonesia
- LBH Netherlands Bv - Netherlands
- Sindya Power Generating Company Private Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Heidelberg Cement - Germany
- Attock Cement Pakistan Limited
- Siam City Cement - Thailand
- Billiton Holdings Pty Ltd - Australia
- Neyveli Lignite Corporation Ltd, - India
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- CNBM International Corporation - China
- MS Steel International - UAE
- Africa Commodities Group - South Africa
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- Indian Oil Corporation Limited
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- Mercator Lines Limited - India
- Bukit Makmur.PT - Indonesia
- Indian Energy Exchange, India
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- Minerals Council of Australia
- Bhatia International Limited - India
- Petron Corporation, Philippines
- Independent Power Producers Association of India
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- The Treasury - Australian Government
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- International Coal Ventures Pvt Ltd - India
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- Edison Trading Spa - Italy
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