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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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Saturday, 23 July 22
STABILITY OF RUSSIAN GAS FLOWS REMAIN UNCERTAIN, DESPITE THE REOPENING OF NORD STREAM - WOOD MACKENZIE
Gazprom confirmed today that regular annual maintenance of Nord Stream is officially over and gas flows restarted at 63 million cubic metres per da ...
Friday, 22 July 22
MARKET INSIGHT - INTERMODAL
Faced with uncertainty regarding the most cost-efficient alternative fuels and the future dominant method to reduce their greenhouse emissions, man ...
Friday, 22 July 22
YANCOAL AUSTRALIA CUTS 2022 COAL OUTPUT VIEW AS FLOODS, COVID BITE - REUTERS
Coal miner Yancoal Australia Ltd YAL.AX cut its 2022 output forecast on Wednesday, signalling a hit from higher-than-expected rainfall, COVID-19-le ...
Wednesday, 20 July 22
BOOST FOR BIOFUELS AS IMO REMOVES REGULATORY HURDLE - GARD
MARPOL Annex VI regulations were written for petroleum derived fuels but also apply to biofuels. It has been a challenge to meet the regulatory req ...
Wednesday, 20 July 22
INDONESIA’S COAL EXPORTS TO THE EU INCREASED SIGNIFICANTLY RECENTLY
European countries have increased coal imports from Indonesia due to the energy crisis that hit the region after Russia cuts gas exports to Europe. ...
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- AsiaOL BioFuels Corp., Philippines
- Goldman Sachs - Singapore
- Gujarat Mineral Development Corp Ltd - India
- Parliament of New Zealand
- Barasentosa Lestari - Indonesia
- Romanian Commodities Exchange
- Coalindo Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Minerals Council of Australia
- Independent Power Producers Association of India
- Star Paper Mills Limited - India
- Bangladesh Power Developement Board
- Holcim Trading Pte Ltd - Singapore
- Commonwealth Bank - Australia
- SMC Global Power, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Neyveli Lignite Corporation Ltd, - India
- Bukit Baiduri Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- Sakthi Sugars Limited - India
- Xindia Steels Limited - India
- Ministry of Finance - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Medco Energi Mining Internasional
- Kobexindo Tractors - Indoneisa
- Ambuja Cements Ltd - India
- Malabar Cements Ltd - India
- Essar Steel Hazira Ltd - India
- Madhucon Powers Ltd - India
- Dalmia Cement Bharat India
- PowerSource Philippines DevCo
- Global Business Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Globalindo Alam Lestari - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Krishnapatnam Port Company Ltd. - India
- Central Electricity Authority - India
- European Bulk Services B.V. - Netherlands
- Kumho Petrochemical, South Korea
- Standard Chartered Bank - UAE
- Miang Besar Coal Terminal - Indonesia
- Trasteel International SA, Italy
- Kideco Jaya Agung - Indonesia
- Altura Mining Limited, Indonesia
- Interocean Group of Companies - India
- Kepco SPC Power Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Latin American Coal - Colombia
- Alfred C Toepfer International GmbH - Germany
- Gujarat Electricity Regulatory Commission - India
- Parry Sugars Refinery, India
- Jorong Barutama Greston.PT - Indonesia
- OPG Power Generation Pvt Ltd - India
- Sojitz Corporation - Japan
- Timah Investasi Mineral - Indoneisa
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Sidhee Cement - India
- Bulk Trading Sa - Switzerland
- Sinarmas Energy and Mining - Indonesia
- CIMB Investment Bank - Malaysia
- Bhushan Steel Limited - India
- Price Waterhouse Coopers - Russia
- Petron Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Videocon Industries ltd - India
- Posco Energy - South Korea
- Cigading International Bulk Terminal - Indonesia
- Georgia Ports Authority, United States
- GAC Shipping (India) Pvt Ltd
- Vedanta Resources Plc - India
- Maheswari Brothers Coal Limited - India
- Deloitte Consulting - India
- Bahari Cakrawala Sebuku - Indonesia
- Toyota Tsusho Corporation, Japan
- Singapore Mercantile Exchange
- Global Green Power PLC Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Rashtriya Ispat Nigam Limited - India
- Ind-Barath Power Infra Limited - India
- Intertek Mineral Services - Indonesia
- Mercator Lines Limited - India
- Salva Resources Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Semirara Mining Corp, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Petrochimia International Co. Ltd.- Taiwan
- Chettinad Cement Corporation Ltd - India
- Energy Development Corp, Philippines
- Orica Australia Pty. Ltd.
- Siam City Cement PLC, Thailand
- Riau Bara Harum - Indonesia
- Indonesian Coal Mining Association
- Wilmar Investment Holdings
- Jindal Steel & Power Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Electricity Generating Authority of Thailand
- Billiton Holdings Pty Ltd - Australia
- Bhatia International Limited - India
- Larsen & Toubro Limited - India
- Formosa Plastics Group - Taiwan
- The State Trading Corporation of India Ltd
- Karaikal Port Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Leighton Contractors Pty Ltd - Australia
- Rio Tinto Coal - Australia
- VISA Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Indian Energy Exchange, India
- New Zealand Coal & Carbon
- Savvy Resources Ltd - HongKong
- Borneo Indobara - Indonesia
- Renaissance Capital - South Africa
- Indo Tambangraya Megah - Indonesia
- Bhoruka Overseas - Indonesia
- Vizag Seaport Private Limited - India
- Mercuria Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Merrill Lynch Commodities Europe
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate Of Revenue Intelligence - India
- The Treasury - Australian Government
- LBH Netherlands Bv - Netherlands
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PTC India Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Makarim & Taira - Indonesia
- Meralco Power Generation, Philippines
- London Commodity Brokers - England
- Grasim Industreis Ltd - India
- Africa Commodities Group - South Africa
- Sindya Power Generating Company Private Ltd
- SMG Consultants - Indonesia
- India Bulls Power Limited - India
- Simpson Spence & Young - Indonesia
- Coal and Oil Company - UAE
- Electricity Authority, New Zealand
- Ministry of Mines - Canada
- Central Java Power - Indonesia
- GVK Power & Infra Limited - India
- Orica Mining Services - Indonesia
- Iligan Light & Power Inc, Philippines
- Global Coal Blending Company Limited - Australia
- Australian Coal Association
- Edison Trading Spa - Italy
- Aditya Birla Group - India
- Samtan Co., Ltd - South Korea
- Thai Mozambique Logistica
- Uttam Galva Steels Limited - India
- Mintek Dendrill Indonesia
- Semirara Mining and Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Mjunction Services Limited - India
- Kartika Selabumi Mining - Indonesia
- PNOC Exploration Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Heidelberg Cement - Germany
- Eastern Coal Council - USA
- Ceylon Electricity Board - Sri Lanka
- TeaM Sual Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indian Oil Corporation Limited
- Indogreen Group - Indonesia
- Metalloyd Limited - United Kingdom
- Chamber of Mines of South Africa
- White Energy Company Limited
- Straits Asia Resources Limited - Singapore
- Manunggal Multi Energi - Indonesia
- Australian Commodity Traders Exchange
- Antam Resourcindo - Indonesia
- Sical Logistics Limited - India
- Siam City Cement - Thailand
- Kaltim Prima Coal - Indonesia
- Sarangani Energy Corporation, Philippines
- Oldendorff Carriers - Singapore
- Power Finance Corporation Ltd., India
- Tata Chemicals Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Baramulti Group, Indonesia
- Lanco Infratech Ltd - India
- Tamil Nadu electricity Board
- Bharathi Cement Corporation - India
- Energy Link Ltd, New Zealand
- ICICI Bank Limited - India
- Meenaskhi Energy Private Limited - India
- IEA Clean Coal Centre - UK
- GMR Energy Limited - India
- ASAPP Information Group - India
- Port Waratah Coal Services - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Thiess Contractors Indonesia
- Sree Jayajothi Cements Limited - India
- Marubeni Corporation - India
- CNBM International Corporation - China
- Carbofer General Trading SA - India
- Binh Thuan Hamico - Vietnam
- Economic Council, Georgia
- MS Steel International - UAE
- Attock Cement Pakistan Limited
- Cement Manufacturers Association - India
- The University of Queensland
- Anglo American - United Kingdom
- Ministry of Transport, Egypt
- Directorate General of MIneral and Coal - Indonesia
- Planning Commission, India
- McConnell Dowell - Australia
- Agrawal Coal Company - India
- Banpu Public Company Limited - Thailand
- GN Power Mariveles Coal Plant, Philippines
- Therma Luzon, Inc, Philippines
- Eastern Energy - Thailand
- Indika Energy - Indonesia
- Wood Mackenzie - Singapore
- Kapuas Tunggal Persada - Indonesia
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