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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, 19 July 22
DRY BULK MARKET: CAPESIZE MARKET FIRMS THIS WEEK - BALTIC EXCHANGE
Capesize
Firmer sentiment across both basins pushed the Capesize 5TC route average above the $20,000 threshold this week, closing at $24,209. A ...
Tuesday, 19 July 22
WHY SHIPPING MIGHT BE ABOUT TO GET A LITTLE BIT SLOWER - WORLD ECONOMIC FORUM
If shipping is the beating heart of global trade, its pulse is about to get slower.
Faced with uncertainty about which fuels to use in the long ...
Tuesday, 19 July 22
GERMANY'S INCREASED COAL, OIL USE WILL BE TEMPORARY, SCHOLZ SAYS - CNBC
Chancellor Olaf Scholz says Germany’s decision to reactivate coal and oil-fired power plants to relieve energy shortages because of the war i ...
Tuesday, 19 July 22
INDONESIA REMOVES PALM OIL EXPORT LEVY UNTIL AUG. 31 - REUTERS
Indonesia has scrapped its export levy for all palm oil products until Aug. 31 in a fresh attempt to boost exports and ease high inventories, finan ...
Tuesday, 19 July 22
CHINA'S JUNE DAILY COAL OUTPUT JUMPS ON PEAK SUMMER DEMAND - REUTERS
China’s daily coal output in June rose 6.6 per cent from a month earlier as miners cranked up output ahead of peak summer temperatures, when ...
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- Central Java Power - Indonesia
- Dalmia Cement Bharat India
- Barasentosa Lestari - Indonesia
- Altura Mining Limited, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Sree Jayajothi Cements Limited - India
- Essar Steel Hazira Ltd - India
- Therma Luzon, Inc, Philippines
- Price Waterhouse Coopers - Russia
- Directorate Of Revenue Intelligence - India
- Indian Energy Exchange, India
- Central Electricity Authority - India
- Malabar Cements Ltd - India
- Carbofer General Trading SA - India
- Indogreen Group - Indonesia
- Kideco Jaya Agung - Indonesia
- Star Paper Mills Limited - India
- Rashtriya Ispat Nigam Limited - India
- Kohat Cement Company Ltd. - Pakistan
- White Energy Company Limited
- Thai Mozambique Logistica
- Globalindo Alam Lestari - Indonesia
- Sical Logistics Limited - India
- Straits Asia Resources Limited - Singapore
- Indonesian Coal Mining Association
- Karbindo Abesyapradhi - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Australian Commodity Traders Exchange
- Bhoruka Overseas - Indonesia
- International Coal Ventures Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Cement Manufacturers Association - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Semirara Mining Corp, Philippines
- Xindia Steels Limited - India
- Coalindo Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Savvy Resources Ltd - HongKong
- Riau Bara Harum - Indonesia
- Eastern Coal Council - USA
- Parry Sugars Refinery, India
- Rio Tinto Coal - Australia
- Aboitiz Power Corporation - Philippines
- Uttam Galva Steels Limited - India
- Renaissance Capital - South Africa
- Simpson Spence & Young - Indonesia
- ASAPP Information Group - India
- Borneo Indobara - Indonesia
- Sojitz Corporation - Japan
- Bhushan Steel Limited - India
- Bharathi Cement Corporation - India
- Kepco SPC Power Corporation, Philippines
- Planning Commission, India
- Bukit Baiduri Energy - Indonesia
- Tamil Nadu electricity Board
- Gujarat Electricity Regulatory Commission - India
- OPG Power Generation Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Alfred C Toepfer International GmbH - Germany
- South Luzon Thermal Energy Corporation
- Georgia Ports Authority, United States
- Chamber of Mines of South Africa
- Vijayanagar Sugar Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- The State Trading Corporation of India Ltd
- Intertek Mineral Services - Indonesia
- Aditya Birla Group - India
- Romanian Commodities Exchange
- Orica Mining Services - Indonesia
- Grasim Industreis Ltd - India
- CIMB Investment Bank - Malaysia
- San Jose City I Power Corp, Philippines
- Mercator Lines Limited - India
- Semirara Mining and Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- IEA Clean Coal Centre - UK
- Leighton Contractors Pty Ltd - Australia
- Salva Resources Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Sinarmas Energy and Mining - Indonesia
- Mjunction Services Limited - India
- MS Steel International - UAE
- Gujarat Sidhee Cement - India
- Anglo American - United Kingdom
- Bayan Resources Tbk. - Indonesia
- Wood Mackenzie - Singapore
- GN Power Mariveles Coal Plant, Philippines
- GMR Energy Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Agrawal Coal Company - India
- Marubeni Corporation - India
- Electricity Generating Authority of Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Eastern Energy - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Lanco Infratech Ltd - India
- Sakthi Sugars Limited - India
- Australian Coal Association
- Oldendorff Carriers - Singapore
- Kaltim Prima Coal - Indonesia
- The Treasury - Australian Government
- Krishnapatnam Port Company Ltd. - India
- Pendopo Energi Batubara - Indonesia
- ICICI Bank Limited - India
- Energy Development Corp, Philippines
- Banpu Public Company Limited - Thailand
- Parliament of New Zealand
- Posco Energy - South Korea
- Economic Council, Georgia
- Bulk Trading Sa - Switzerland
- GAC Shipping (India) Pvt Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Mercuria Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Interocean Group of Companies - India
- PetroVietnam Power Coal Import and Supply Company
- Trasteel International SA, Italy
- Heidelberg Cement - Germany
- Formosa Plastics Group - Taiwan
- Manunggal Multi Energi - Indonesia
- Latin American Coal - Colombia
- Ministry of Mines - Canada
- The University of Queensland
- Holcim Trading Pte Ltd - Singapore
- Larsen & Toubro Limited - India
- European Bulk Services B.V. - Netherlands
- Bangladesh Power Developement Board
- Ambuja Cements Ltd - India
- LBH Netherlands Bv - Netherlands
- Goldman Sachs - Singapore
- Makarim & Taira - Indonesia
- Coastal Gujarat Power Limited - India
- Kobexindo Tractors - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Electricity Authority, New Zealand
- Bukit Makmur.PT - Indonesia
- Meralco Power Generation, Philippines
- Tata Chemicals Ltd - India
- Merrill Lynch Commodities Europe
- PowerSource Philippines DevCo
- Siam City Cement - Thailand
- GVK Power & Infra Limited - India
- Antam Resourcindo - Indonesia
- Port Waratah Coal Services - Australia
- Timah Investasi Mineral - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- Standard Chartered Bank - UAE
- Orica Australia Pty. Ltd.
- Samtan Co., Ltd - South Korea
- Bhatia International Limited - India
- Medco Energi Mining Internasional
- Jaiprakash Power Ventures ltd
- Sindya Power Generating Company Private Ltd
- SMG Consultants - Indonesia
- Ministry of Transport, Egypt
- Meenaskhi Energy Private Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Baramulti Group, Indonesia
- Wilmar Investment Holdings
- Kartika Selabumi Mining - Indonesia
- Maheswari Brothers Coal Limited - India
- Minerals Council of Australia
- SMC Global Power, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Commonwealth Bank - Australia
- Energy Link Ltd, New Zealand
- Singapore Mercantile Exchange
- Madhucon Powers Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- New Zealand Coal & Carbon
- Petron Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- CNBM International Corporation - China
- TNB Fuel Sdn Bhd - Malaysia
- Sarangani Energy Corporation, Philippines
- Coal and Oil Company - UAE
- Vizag Seaport Private Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Chettinad Cement Corporation Ltd - India
- Karaikal Port Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- PNOC Exploration Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- TeaM Sual Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Africa Commodities Group - South Africa
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- Deloitte Consulting - India
- Global Green Power PLC Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Kumho Petrochemical, South Korea
- Edison Trading Spa - Italy
- Videocon Industries ltd - India
- Indo Tambangraya Megah - Indonesia
- VISA Power Limited - India
- Power Finance Corporation Ltd., India
- PTC India Limited - India
- Thiess Contractors Indonesia
- India Bulls Power Limited - India
- Attock Cement Pakistan Limited
- Ministry of Finance - Indonesia
- McConnell Dowell - Australia
- Indika Energy - Indonesia
- Indian Oil Corporation Limited
- Mintek Dendrill Indonesia
- Ind-Barath Power Infra Limited - India
- London Commodity Brokers - England
- IHS Mccloskey Coal Group - USA
- Cigading International Bulk Terminal - Indonesia
- Independent Power Producers Association of India
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