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Thursday, 30 June 22
WHY ARE LNG SHIPPING STOCKS RESILIENT? - DREWRY
LNG shipping stocks are proving resilient despite uncertainties about growth in global GDP, high inflation and the ongoing geopolitical crisis caused by the Russia-Ukraine conflict. Drewry’s LNG shipping equity index increased by 12.7% YTD as of 28 June 2022, outperforming S&P 500 which declined by 19.8% during the same period. Golar LNG stock price surged the most (up 87.9%), while Flex LNG increased by 24.8% and Nakilat by +18.2.%. LNG stocks have mainly benefited from the rising European LNG demand as the region switches away from Russian natural gas. We explore the reasons for the resilience of LNG shipping stocks amid the sell-off in the broader equity market and whether investors should consider adding LNG stocks to their portfolios.
FSRU focused stocks are key beneficiaries
Companies with FSRU exposure have particularly benefited as European countries are opting for FSRUs over their land-based counterparts. FSRU terminals can be installed in one-two years compared to three years for LNG import terminals. Golar LNG’s share price has profited from its exposure to FSRU, the company’s stake in New Fortress Energy (NFE – a leading FSRU player) and high crude oil prices. Amid a buoyant FSRU market, Golar LNG has entered into a contract with Snam to sell its 19-year-old LNG vessel Golar Arctic for USD 287.9mn (EUR 269mn) as an FSRU after conversion. The company has also signed an agreement with Snam to sell Golar Tundra FSRU for USD 350mn. NFE, which has a fleet of seven FSRUs and in which Golar LNG has a stake of 6%, has gained 68.5% YTD.
FSRUs are in high demand with Europe seeking at least 16 FSRUs to replace most of the Russian gas imports. We believe countries like Germany, France and Italy are willing to pay a high premium to acquire the assets, but with only 50 FSRUs (as of March 2022) in operation globally, the demand for FSRU providers has strengthened.
Buoyant market drives new charter wins
The upcoming EEXI and CII regulations and charters’ desire to secure LNG ships amid the geopolitical tensions are other factors driving LNG shipping demand. Flex LNG has won fixed charter for 12 vessels since March 2021, suggesting strong demand for its young fleet, with three of these charter wins in June 2022. Latest charter wins announced in June 2022 extend between seven and ten years, longer than most of the company’s existing charters and suggest increasing preference of charterers to go for longer term charter. Nakilat announced during its 4Q21 results that it has won the term-charter for all the four newbuild vessels delivered between 2Q20 and 1Q22.
LNG shipping prospects
The Russia-Ukraine war has brought the energy sector to the center stage with more focus on the LNG industry as Europe tries to wean away from Russian LNG imports and is ramping up its LNG import facilities by investing in FSRUs. As the coming years should see more FID for LNG liquefaction projects, leading to higher demand for LNG ships, we expect spot and long-term LNG shipping rates to firm up. LNG shipping companies stand to benefit from this high charter rate environment. Expectations of tight LNG supply and European geopolitical tensions is accelerating sale and purchase agreements for LNG and in turn, FIDs for new LNG projects. Charterers are preferring long-term charter to cover volatility in a tight supply market. While new order momentum is high in 2022 YTD with close to 100 LNG ship orders, we expect LNG shipping rates to continue to rise as most of the new orders have firm charter.
Upcoming EEXI and CII regulations to support LNG freight rates
As EEXI and CII regulations come into effect from 1 January 2023, we expect an increase in conversion activity of older stream turbine vessels into FSU for import projects as we believe these vessels will be more impacted by the new regulations. While these vessels will need to reduce their speed to comply with the regulations, the very old vessels will become unviable and will exit the fleet, affecting capacity and consequently supporting higher freight rates.
More borrowing capacity with a healthier balance sheet
LNG shipping companies have a healthier balance sheet at the end of 1Q22 compared to 4Q20. Furthermore, an increase in LNG vessel prices since mid-2020 indicates higher borrowings potential which can be used to acquire new vessels. Given the strong prospects, it is comparatively easier now to win a long-term charter compared to the previous two years.
Conclusion
We expect earnings of LNG shipping companies to benefit from positive LNG shipping prospects in the coming quarters. Given the tight LNG shipping prospects and LNG stocks’ resilience thus far, we believe investors can consider adding LNG shipping stocks to their portfolio. We prefer companies with solid revenues, young fleet and healthy balance sheet.
Source: Drewry
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Tuesday, 23 August 22
SHIPPING INDUSTRY TO REMOVE THE INDIAN OCEAN HIGH RISK AREA - BIMCO
After more than a decade of effective threat-reducing counter-piracy operations the shipping industry has removed the ‘Indian Ocean High Risk ...
Tuesday, 23 August 22
SHIPPING: GLOBAL TAX REFORM - WATSON FARLEY & WILLIAMS
OECD rules designed to implement a global minimum corporate tax rate for very large multinational groups have now been published and are expected t ...
Tuesday, 23 August 22
PARTIES CONCLUDE JOINT R&D AGREEMENT FOR WORLD’S FIRST AMMONIA FLOATING STORAGE AND REGASIFICATION BARGE CONTRIBUTING TO PROMOTING THE EARLY INTRODUCTION OF AMMONIA FUEL - NYK
NYK Line, Nihon Shipyard Co., Ltd. (NSY), ClassNK, and IHI Corporation (IHI) signed a joint research and development agreement for the commercializ ...
Monday, 22 August 22
INDONESIAN GOVERNMENT IMPOSED ON NEW PROGRESSIVE ROYALTIES FOR COAL
Indonesian President Joko Widodo has signed a Government Regulation (Number 26 of 2022) on 15 August 2022 related to the progressive royalty rates ...
Monday, 22 August 22
CHINA'S JULY RUSSIAN COAL IMPORTS HIT 5-YR HIGH AS WEST SHUNS MOSCOW - REUTERS
China’s coal imports from Russia jumped 14% in July from a year earlier to their highest in at least five years, as China bought discounted c ...
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- Maharashtra Electricity Regulatory Commission - India
- TeaM Sual Corporation - Philippines
- The University of Queensland
- San Jose City I Power Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- Australian Coal Association
- Parry Sugars Refinery, India
- Singapore Mercantile Exchange
- Wilmar Investment Holdings
- Kumho Petrochemical, South Korea
- Maheswari Brothers Coal Limited - India
- MS Steel International - UAE
- Interocean Group of Companies - India
- Pendopo Energi Batubara - Indonesia
- ASAPP Information Group - India
- Gujarat Sidhee Cement - India
- Indo Tambangraya Megah - Indonesia
- Simpson Spence & Young - Indonesia
- London Commodity Brokers - England
- Australian Commodity Traders Exchange
- CIMB Investment Bank - Malaysia
- Indogreen Group - Indonesia
- Mjunction Services Limited - India
- Sinarmas Energy and Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Finance - Indonesia
- Malabar Cements Ltd - India
- Semirara Mining Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- Madhucon Powers Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- India Bulls Power Limited - India
- Orica Mining Services - Indonesia
- Tata Chemicals Ltd - India
- The Treasury - Australian Government
- Economic Council, Georgia
- Bangladesh Power Developement Board
- Kapuas Tunggal Persada - Indonesia
- Globalindo Alam Lestari - Indonesia
- International Coal Ventures Pvt Ltd - India
- Heidelberg Cement - Germany
- Leighton Contractors Pty Ltd - Australia
- Parliament of New Zealand
- Riau Bara Harum - Indonesia
- Ind-Barath Power Infra Limited - India
- Renaissance Capital - South Africa
- Karaikal Port Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Electricity Authority, New Zealand
- Rashtriya Ispat Nigam Limited - India
- Bharathi Cement Corporation - India
- Bhoruka Overseas - Indonesia
- SMC Global Power, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Indonesian Coal Mining Association
- Chamber of Mines of South Africa
- Chettinad Cement Corporation Ltd - India
- Sree Jayajothi Cements Limited - India
- Coastal Gujarat Power Limited - India
- Xindia Steels Limited - India
- Merrill Lynch Commodities Europe
- IHS Mccloskey Coal Group - USA
- Grasim Industreis Ltd - India
- Essar Steel Hazira Ltd - India
- Borneo Indobara - Indonesia
- Altura Mining Limited, Indonesia
- Carbofer General Trading SA - India
- Central Java Power - Indonesia
- Indian Energy Exchange, India
- Dalmia Cement Bharat India
- Sakthi Sugars Limited - India
- Miang Besar Coal Terminal - Indonesia
- Star Paper Mills Limited - India
- Global Green Power PLC Corporation, Philippines
- Marubeni Corporation - India
- Binh Thuan Hamico - Vietnam
- Bukit Baiduri Energy - Indonesia
- Rio Tinto Coal - Australia
- Uttam Galva Steels Limited - India
- Mercator Lines Limited - India
- Tamil Nadu electricity Board
- PowerSource Philippines DevCo
- Cigading International Bulk Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Medco Energi Mining Internasional
- Eastern Coal Council - USA
- CNBM International Corporation - China
- Billiton Holdings Pty Ltd - Australia
- Anglo American - United Kingdom
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ambuja Cements Ltd - India
- PNOC Exploration Corporation - Philippines
- Edison Trading Spa - Italy
- Vedanta Resources Plc - India
- GN Power Mariveles Coal Plant, Philippines
- Bukit Makmur.PT - Indonesia
- Mintek Dendrill Indonesia
- Cement Manufacturers Association - India
- Timah Investasi Mineral - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- Savvy Resources Ltd - HongKong
- Bulk Trading Sa - Switzerland
- Vijayanagar Sugar Pvt Ltd - India
- PTC India Limited - India
- Aboitiz Power Corporation - Philippines
- Global Business Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Oldendorff Carriers - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Electricity Generating Authority of Thailand
- Latin American Coal - Colombia
- Larsen & Toubro Limited - India
- Global Coal Blending Company Limited - Australia
- Minerals Council of Australia
- Kohat Cement Company Ltd. - Pakistan
- Eastern Energy - Thailand
- Kobexindo Tractors - Indoneisa
- Kaltim Prima Coal - Indonesia
- VISA Power Limited - India
- Trasteel International SA, Italy
- Karbindo Abesyapradhi - Indoneisa
- Energy Link Ltd, New Zealand
- Holcim Trading Pte Ltd - Singapore
- Ministry of Transport, Egypt
- Baramulti Group, Indonesia
- Wood Mackenzie - Singapore
- Coalindo Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Central Electricity Authority - India
- Therma Luzon, Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Power Finance Corporation Ltd., India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Directorate Of Revenue Intelligence - India
- Banpu Public Company Limited - Thailand
- Aditya Birla Group - India
- Standard Chartered Bank - UAE
- Indika Energy - Indonesia
- Metalloyd Limited - United Kingdom
- SMG Consultants - Indonesia
- Intertek Mineral Services - Indonesia
- Deloitte Consulting - India
- Thiess Contractors Indonesia
- Makarim & Taira - Indonesia
- Jaiprakash Power Ventures ltd
- IEA Clean Coal Centre - UK
- Barasentosa Lestari - Indonesia
- Mercuria Energy - Indonesia
- ICICI Bank Limited - India
- Samtan Co., Ltd - South Korea
- White Energy Company Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement PLC, Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Mines - Canada
- Orica Australia Pty. Ltd.
- Sarangani Energy Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Meralco Power Generation, Philippines
- Kepco SPC Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Indian Oil Corporation Limited
- Kideco Jaya Agung - Indonesia
- Vizag Seaport Private Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Posco Energy - South Korea
- South Luzon Thermal Energy Corporation
- Bahari Cakrawala Sebuku - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Bhatia International Limited - India
- Neyveli Lignite Corporation Ltd, - India
- GMR Energy Limited - India
- AsiaOL BioFuels Corp., Philippines
- PetroVietnam Power Coal Import and Supply Company
- GAC Shipping (India) Pvt Ltd
- Bhushan Steel Limited - India
- Price Waterhouse Coopers - Russia
- Antam Resourcindo - Indonesia
- OPG Power Generation Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Siam City Cement - Thailand
- Independent Power Producers Association of India
- Agrawal Coal Company - India
- Pipit Mutiara Jaya. PT, Indonesia
- Petron Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Planning Commission, India
- SN Aboitiz Power Inc, Philippines
- Lanco Infratech Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- GVK Power & Infra Limited - India
- Thai Mozambique Logistica
- Attock Cement Pakistan Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- Georgia Ports Authority, United States
- Iligan Light & Power Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Romanian Commodities Exchange
- Sojitz Corporation - Japan
- Energy Development Corp, Philippines
- Toyota Tsusho Corporation, Japan
- European Bulk Services B.V. - Netherlands
- Sical Logistics Limited - India
- Coal and Oil Company - UAE
- Goldman Sachs - Singapore
- Commonwealth Bank - Australia
- Africa Commodities Group - South Africa
- The State Trading Corporation of India Ltd
- LBH Netherlands Bv - Netherlands
- New Zealand Coal & Carbon
- McConnell Dowell - Australia
- Videocon Industries ltd - India
- Jindal Steel & Power Ltd - India
- Sindya Power Generating Company Private Ltd
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