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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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Friday, 29 July 22
GLENCORE TO SUPPLY COAL TO NIPPON STEEL AT $375 PER TON - BLOOMBERG
Glencore Plc, agreed to supply coal to Nippon Steel at one of the highest prices ever paid by the Japan Bloomberg reported on July 27.
...
Friday, 29 July 22
GLOBAL COAL DEMAND IS SET TO RETURN TO ITS ALL-TIME HIGH IN 2022 - IEA
The world’s consumption of coal is set to rise slightly in 2022, taking it back to the record level it reached nearly a decade ago, according ...
Thursday, 28 July 22
CREW FAMILIARISATION IS CRITICAL WHEN TAKING OVER A VESSEL - WEST P&I CLUB
Knowledge to Elevate
When a vessel changes ownership and/or manager, it can take some considerable time before the new crew and mana ...
Thursday, 28 July 22
RETURN OF COAL A THREAT TO EUROPEAN COMPANIES' ESG RATINGS - REUTERS
European companies turning to coal as an alternative to Russian gas face a hit to their environmental, social and governance ratings, leaving them ...
Wednesday, 27 July 22
MARKET INSIGHT - INTERMODAL
Amid the upcoming ban on Russian coal from the EU, which will be in full effect on August 10th, EU nations have been accelerating their coal import ...
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- Thai Mozambique Logistica
- Krishnapatnam Port Company Ltd. - India
- Siam City Cement - Thailand
- Kumho Petrochemical, South Korea
- Electricity Authority, New Zealand
- European Bulk Services B.V. - Netherlands
- Bayan Resources Tbk. - Indonesia
- Malabar Cements Ltd - India
- Goldman Sachs - Singapore
- ICICI Bank Limited - India
- Sindya Power Generating Company Private Ltd
- Formosa Plastics Group - Taiwan
- Romanian Commodities Exchange
- Mjunction Services Limited - India
- Leighton Contractors Pty Ltd - Australia
- Chettinad Cement Corporation Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Standard Chartered Bank - UAE
- Maharashtra Electricity Regulatory Commission - India
- Dalmia Cement Bharat India
- Videocon Industries ltd - India
- Carbofer General Trading SA - India
- Thiess Contractors Indonesia
- Madhucon Powers Ltd - India
- Siam City Cement PLC, Thailand
- Ministry of Finance - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Anglo American - United Kingdom
- Economic Council, Georgia
- OPG Power Generation Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Bhoruka Overseas - Indonesia
- Marubeni Corporation - India
- Interocean Group of Companies - India
- Bukit Asam (Persero) Tbk - Indonesia
- Latin American Coal - Colombia
- Energy Link Ltd, New Zealand
- Altura Mining Limited, Indonesia
- LBH Netherlands Bv - Netherlands
- GMR Energy Limited - India
- Ceylon Electricity Board - Sri Lanka
- Manunggal Multi Energi - Indonesia
- Meralco Power Generation, Philippines
- Singapore Mercantile Exchange
- MS Steel International - UAE
- Central Electricity Authority - India
- Rio Tinto Coal - Australia
- Asmin Koalindo Tuhup - Indonesia
- Makarim & Taira - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bharathi Cement Corporation - India
- Mintek Dendrill Indonesia
- Billiton Holdings Pty Ltd - Australia
- PNOC Exploration Corporation - Philippines
- Semirara Mining Corp, Philippines
- Orica Australia Pty. Ltd.
- Edison Trading Spa - Italy
- Parry Sugars Refinery, India
- Ambuja Cements Ltd - India
- Georgia Ports Authority, United States
- Rashtriya Ispat Nigam Limited - India
- Meenaskhi Energy Private Limited - India
- Kobexindo Tractors - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Bukit Baiduri Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Maheswari Brothers Coal Limited - India
- White Energy Company Limited
- Globalindo Alam Lestari - Indonesia
- Xindia Steels Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Karaikal Port Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Baramulti Group, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Binh Thuan Hamico - Vietnam
- Sinarmas Energy and Mining - Indonesia
- Star Paper Mills Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Indogreen Group - Indonesia
- Tata Chemicals Ltd - India
- PowerSource Philippines DevCo
- Samtan Co., Ltd - South Korea
- Pendopo Energi Batubara - Indonesia
- Sojitz Corporation - Japan
- Riau Bara Harum - Indonesia
- Heidelberg Cement - Germany
- Coastal Gujarat Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Indian Energy Exchange, India
- Intertek Mineral Services - Indonesia
- The University of Queensland
- Global Coal Blending Company Limited - Australia
- Gujarat Sidhee Cement - India
- Global Green Power PLC Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Straits Asia Resources Limited - Singapore
- Posco Energy - South Korea
- Bank of Tokyo Mitsubishi UFJ Ltd
- Aditya Birla Group - India
- Salva Resources Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Commonwealth Bank - Australia
- Sarangani Energy Corporation, Philippines
- Oldendorff Carriers - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Ind-Barath Power Infra Limited - India
- Tamil Nadu electricity Board
- Sree Jayajothi Cements Limited - India
- Attock Cement Pakistan Limited
- Aboitiz Power Corporation - Philippines
- IEA Clean Coal Centre - UK
- IHS Mccloskey Coal Group - USA
- Trasteel International SA, Italy
- ASAPP Information Group - India
- Global Business Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Merrill Lynch Commodities Europe
- Barasentosa Lestari - Indonesia
- Borneo Indobara - Indonesia
- Medco Energi Mining Internasional
- Essar Steel Hazira Ltd - India
- Power Finance Corporation Ltd., India
- Pipit Mutiara Jaya. PT, Indonesia
- Renaissance Capital - South Africa
- Vedanta Resources Plc - India
- Eastern Coal Council - USA
- Uttam Galva Steels Limited - India
- Sical Logistics Limited - India
- Parliament of New Zealand
- Africa Commodities Group - South Africa
- Electricity Generating Authority of Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- Agrawal Coal Company - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Planning Commission, India
- Mercuria Energy - Indonesia
- Ministry of Mines - Canada
- New Zealand Coal & Carbon
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Coal and Oil Company - UAE
- Therma Luzon, Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kartika Selabumi Mining - Indonesia
- Gujarat Electricity Regulatory Commission - India
- International Coal Ventures Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Neyveli Lignite Corporation Ltd, - India
- Indonesian Coal Mining Association
- McConnell Dowell - Australia
- Vizag Seaport Private Limited - India
- Indo Tambangraya Megah - Indonesia
- Price Waterhouse Coopers - Russia
- Deloitte Consulting - India
- Miang Besar Coal Terminal - Indonesia
- Simpson Spence & Young - Indonesia
- Cement Manufacturers Association - India
- Coalindo Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- SMC Global Power, Philippines
- Energy Development Corp, Philippines
- GAC Shipping (India) Pvt Ltd
- Lanco Infratech Ltd - India
- Bukit Makmur.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Iligan Light & Power Inc, Philippines
- Ministry of Transport, Egypt
- Eastern Energy - Thailand
- The State Trading Corporation of India Ltd
- Minerals Council of Australia
- Indian Oil Corporation Limited
- VISA Power Limited - India
- Kaltim Prima Coal - Indonesia
- Wood Mackenzie - Singapore
- Australian Coal Association
- Central Java Power - Indonesia
- Mercator Lines Limited - India
- Banpu Public Company Limited - Thailand
- Directorate Of Revenue Intelligence - India
- Bhushan Steel Limited - India
- Wilmar Investment Holdings
- India Bulls Power Limited - India
- CNBM International Corporation - China
- Australian Commodity Traders Exchange
- Port Waratah Coal Services - Australia
- Kideco Jaya Agung - Indonesia
- Larsen & Toubro Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Indika Energy - Indonesia
- Bangladesh Power Developement Board
- SMG Consultants - Indonesia
- Savvy Resources Ltd - HongKong
- Antam Resourcindo - Indonesia
- PTC India Limited - India
- The Treasury - Australian Government
- Petrochimia International Co. Ltd.- Taiwan
- AsiaOL BioFuels Corp., Philippines
- London Commodity Brokers - England
- Jaiprakash Power Ventures ltd
- Bhatia International Limited - India
- TeaM Sual Corporation - Philippines
- Petron Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Sakthi Sugars Limited - India
- GVK Power & Infra Limited - India
- CIMB Investment Bank - Malaysia
- Independent Power Producers Association of India
- Chamber of Mines of South Africa
- Orica Mining Services - Indonesia
- Bulk Trading Sa - Switzerland
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