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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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Thursday, 17 December 20
BUMA SIGNED US$1.0 BILLION WORTH OF EXTENSION CONTRACT WITH BERAU COAL
PT Bukit Makmur Mandiri Utama, subsidiary of PT Delta Dunia Makmur Tbk., has extended its mining services contracts with PT Berau Coal, in relation ...
Wednesday, 16 December 20
INDONESIA 2020 COAL CONSUMPTION ESTIMATED AT 140-145 MLN TONNES - OFFICIAL, REUTERS REPORTED
Indonesia’s domestic coal consumption is estimated at 140-145 million tonnes this year, Dodik Ariyanto, an official at the energy ministry, t ...
Wednesday, 16 December 20
RUSSIA REVISES DOWN EXPORT EXPECTATION - FITCH
The Ministry of Economy of Russia, the world’s third largest thermal coal exporting country, released its annual forecasts ...
Wednesday, 16 December 20
INDIAN COAL IMPORTS TO REMAIN SUBDUED - FITCH RATINGS
Fitch Rating commented on Indian Coal Imports, Fitch said, coal imports by Indian utilities fell by about 24% yoy to 44 million tonnes (mt) i ...
Wednesday, 16 December 20
CHINA TO BOOST DOMESTIC SUPPLY - FITCH
China’s benchmark Qinhuangdao 5,500kcal/kg coal price rose above the government’s upper yellow interval of CNY600/tonne in early Octobe ...
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- Edison Trading Spa - Italy
- Salva Resources Pvt Ltd - India
- Agrawal Coal Company - India
- GN Power Mariveles Coal Plant, Philippines
- Attock Cement Pakistan Limited
- Indonesian Coal Mining Association
- Bayan Resources Tbk. - Indonesia
- Bukit Makmur.PT - Indonesia
- Bangladesh Power Developement Board
- Standard Chartered Bank - UAE
- Romanian Commodities Exchange
- Global Business Power Corporation, Philippines
- Chamber of Mines of South Africa
- Anglo American - United Kingdom
- Electricity Authority, New Zealand
- Meenaskhi Energy Private Limited - India
- Eastern Energy - Thailand
- Siam City Cement PLC, Thailand
- Mintek Dendrill Indonesia
- Eastern Coal Council - USA
- Ministry of Finance - Indonesia
- PNOC Exploration Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Carbofer General Trading SA - India
- Samtan Co., Ltd - South Korea
- PetroVietnam Power Coal Import and Supply Company
- Baramulti Group, Indonesia
- Ministry of Mines - Canada
- Intertek Mineral Services - Indonesia
- Interocean Group of Companies - India
- Straits Asia Resources Limited - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- OPG Power Generation Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Africa Commodities Group - South Africa
- IEA Clean Coal Centre - UK
- Merrill Lynch Commodities Europe
- India Bulls Power Limited - India
- Posco Energy - South Korea
- Petron Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Bhushan Steel Limited - India
- McConnell Dowell - Australia
- Bhoruka Overseas - Indonesia
- Power Finance Corporation Ltd., India
- Orica Australia Pty. Ltd.
- Essar Steel Hazira Ltd - India
- Lanco Infratech Ltd - India
- Singapore Mercantile Exchange
- Gujarat Electricity Regulatory Commission - India
- Meralco Power Generation, Philippines
- Madhucon Powers Ltd - India
- Kobexindo Tractors - Indoneisa
- Sarangani Energy Corporation, Philippines
- Ministry of Transport, Egypt
- Therma Luzon, Inc, Philippines
- Directorate Of Revenue Intelligence - India
- Latin American Coal - Colombia
- Aditya Birla Group - India
- Borneo Indobara - Indonesia
- ASAPP Information Group - India
- Videocon Industries ltd - India
- Ind-Barath Power Infra Limited - India
- Thiess Contractors Indonesia
- Goldman Sachs - Singapore
- GAC Shipping (India) Pvt Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Jindal Steel & Power Ltd - India
- Antam Resourcindo - Indonesia
- Planning Commission, India
- Commonwealth Bank - Australia
- Kaltim Prima Coal - Indonesia
- TeaM Sual Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- Thai Mozambique Logistica
- Maharashtra Electricity Regulatory Commission - India
- Bulk Trading Sa - Switzerland
- Neyveli Lignite Corporation Ltd, - India
- Pendopo Energi Batubara - Indonesia
- Maheswari Brothers Coal Limited - India
- London Commodity Brokers - England
- Ceylon Electricity Board - Sri Lanka
- Indo Tambangraya Megah - Indonesia
- Kideco Jaya Agung - Indonesia
- New Zealand Coal & Carbon
- The Treasury - Australian Government
- Chettinad Cement Corporation Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Coastal Gujarat Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Aboitiz Power Corporation - Philippines
- Wood Mackenzie - Singapore
- Economic Council, Georgia
- Kumho Petrochemical, South Korea
- Renaissance Capital - South Africa
- Coal and Oil Company - UAE
- Larsen & Toubro Limited - India
- Holcim Trading Pte Ltd - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Star Paper Mills Limited - India
- Mercator Lines Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Siam City Cement - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Uttam Galva Steels Limited - India
- Sree Jayajothi Cements Limited - India
- Cement Manufacturers Association - India
- The University of Queensland
- Kohat Cement Company Ltd. - Pakistan
- San Jose City I Power Corp, Philippines
- Altura Mining Limited, Indonesia
- Savvy Resources Ltd - HongKong
- Grasim Industreis Ltd - India
- Ambuja Cements Ltd - India
- Oldendorff Carriers - Singapore
- Heidelberg Cement - Germany
- Krishnapatnam Port Company Ltd. - India
- Sinarmas Energy and Mining - Indonesia
- Timah Investasi Mineral - Indoneisa
- LBH Netherlands Bv - Netherlands
- Bukit Baiduri Energy - Indonesia
- Vizag Seaport Private Limited - India
- Australian Commodity Traders Exchange
- Barasentosa Lestari - Indonesia
- Sojitz Corporation - Japan
- Kartika Selabumi Mining - Indonesia
- Georgia Ports Authority, United States
- Rashtriya Ispat Nigam Limited - India
- GMR Energy Limited - India
- Gujarat Sidhee Cement - India
- Coalindo Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- Semirara Mining and Power Corporation, Philippines
- SMG Consultants - Indonesia
- Karaikal Port Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Bhatia International Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Indian Energy Exchange, India
- Indika Energy - Indonesia
- Minerals Council of Australia
- Toyota Tsusho Corporation, Japan
- Malabar Cements Ltd - India
- SN Aboitiz Power Inc, Philippines
- Indogreen Group - Indonesia
- SMC Global Power, Philippines
- ICICI Bank Limited - India
- Kalimantan Lumbung Energi - Indonesia
- The State Trading Corporation of India Ltd
- Mjunction Services Limited - India
- Orica Mining Services - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Parliament of New Zealand
- VISA Power Limited - India
- Tata Chemicals Ltd - India
- Sakthi Sugars Limited - India
- Miang Besar Coal Terminal - Indonesia
- Mercuria Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Iligan Light & Power Inc, Philippines
- Sindya Power Generating Company Private Ltd
- Directorate General of MIneral and Coal - Indonesia
- Marubeni Corporation - India
- CNBM International Corporation - China
- Pipit Mutiara Jaya. PT, Indonesia
- Energy Link Ltd, New Zealand
- South Luzon Thermal Energy Corporation
- Makarim & Taira - Indonesia
- GVK Power & Infra Limited - India
- Independent Power Producers Association of India
- Price Waterhouse Coopers - Russia
- Tamil Nadu electricity Board
- Jorong Barutama Greston.PT - Indonesia
- Dalmia Cement Bharat India
- TNB Fuel Sdn Bhd - Malaysia
- Binh Thuan Hamico - Vietnam
- Cigading International Bulk Terminal - Indonesia
- Formosa Plastics Group - Taiwan
- International Coal Ventures Pvt Ltd - India
- Rio Tinto Coal - Australia
- Riau Bara Harum - Indonesia
- Simpson Spence & Young - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- PowerSource Philippines DevCo
- Sical Logistics Limited - India
- Deloitte Consulting - India
- Central Java Power - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Xindia Steels Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Metalloyd Limited - United Kingdom
- Medco Energi Mining Internasional
- Australian Coal Association
- Karbindo Abesyapradhi - Indoneisa
- MS Steel International - UAE
- White Energy Company Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Manunggal Multi Energi - Indonesia
- Central Electricity Authority - India
- Energy Development Corp, Philippines
- CIMB Investment Bank - Malaysia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Oil Corporation Limited
- Wilmar Investment Holdings
- Jaiprakash Power Ventures ltd
- Kepco SPC Power Corporation, Philippines
- Vedanta Resources Plc - India
- Semirara Mining Corp, Philippines
- PTC India Limited - India
- Banpu Public Company Limited - Thailand
- Electricity Generating Authority of Thailand
- Bharathi Cement Corporation - India
- Trasteel International SA, Italy
- Parry Sugars Refinery, India
- Globalindo Alam Lestari - Indonesia
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