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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
SEEING RED? - WOOD MACKENZIE
What a Republican mid-term victory could mean for US energy and climate policy
According to current polling the Republican Party has ...
Thursday, 14 July 22
INDIA'S COAL IMPORTS HIT RECORD HIGH IN JUNE - REUTERS
India's coal imports hit a record high in June despite high global prices, data from three trade sources and Refinitiv ship tracking showed, as ...
Thursday, 14 July 22
CHINA'S JUNE COAL IMPORTS SLUMP AS TRADERS SHUN EXPENSIVE OVERSEAS CARGOES - REUTERS
China’s coal imports fell 33% in June from a year ago, with traders turning down expensive overseas cargoes in favor of domestic ones with ca ...
Wednesday, 13 July 22
KOWEPO TO IMPORT 2.79 MILLION TONS OF LOW TO MEDIUM COAL
COALspot.com: Korea Western Power Co., Ltd. (KOWEPO) has issued an International tender for Total 1360k MT of Min.4400 kcal/kg NCV coal and Total 1 ...
Wednesday, 13 July 22
HAVE MINERS MISSED THE BOAT TO INVEST AND GET AHEAD OF THE ENERGY TRANSITION? - WOOD MACKENZIE
Miners are in rude health, benefiting from economic stimuli, the post-pandemic recovery and associated supply constraints. Initially the Ukraine wa ...
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- Holcim Trading Pte Ltd - Singapore
- San Jose City I Power Corp, Philippines
- Africa Commodities Group - South Africa
- Straits Asia Resources Limited - Singapore
- Intertek Mineral Services - Indonesia
- Semirara Mining Corp, Philippines
- Aditya Birla Group - India
- Coal and Oil Company - UAE
- Formosa Plastics Group - Taiwan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Coal Blending Company Limited - Australia
- ICICI Bank Limited - India
- Lanco Infratech Ltd - India
- Mercator Lines Limited - India
- Chamber of Mines of South Africa
- Siam City Cement PLC, Thailand
- Heidelberg Cement - Germany
- Karaikal Port Pvt Ltd - India
- GVK Power & Infra Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Gujarat Sidhee Cement - India
- Metalloyd Limited - United Kingdom
- Wood Mackenzie - Singapore
- Maheswari Brothers Coal Limited - India
- Essar Steel Hazira Ltd - India
- Indika Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- SMC Global Power, Philippines
- Anglo American - United Kingdom
- Merrill Lynch Commodities Europe
- Price Waterhouse Coopers - Russia
- Parry Sugars Refinery, India
- Bhushan Steel Limited - India
- Eastern Coal Council - USA
- Carbofer General Trading SA - India
- Globalindo Alam Lestari - Indonesia
- Deloitte Consulting - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Energy Development Corp, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Edison Trading Spa - Italy
- PetroVietnam Power Coal Import and Supply Company
- Trasteel International SA, Italy
- Borneo Indobara - Indonesia
- International Coal Ventures Pvt Ltd - India
- Planning Commission, India
- Attock Cement Pakistan Limited
- Miang Besar Coal Terminal - Indonesia
- Altura Mining Limited, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Mines - Canada
- Bhatia International Limited - India
- New Zealand Coal & Carbon
- Bulk Trading Sa - Switzerland
- Chettinad Cement Corporation Ltd - India
- London Commodity Brokers - England
- Parliament of New Zealand
- Salva Resources Pvt Ltd - India
- Bharathi Cement Corporation - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Medco Energi Mining Internasional
- Therma Luzon, Inc, Philippines
- Larsen & Toubro Limited - India
- Banpu Public Company Limited - Thailand
- LBH Netherlands Bv - Netherlands
- Rio Tinto Coal - Australia
- Bayan Resources Tbk. - Indonesia
- Star Paper Mills Limited - India
- Thiess Contractors Indonesia
- Kepco SPC Power Corporation, Philippines
- ASAPP Information Group - India
- Renaissance Capital - South Africa
- The State Trading Corporation of India Ltd
- GMR Energy Limited - India
- The University of Queensland
- Thai Mozambique Logistica
- Makarim & Taira - Indonesia
- Indo Tambangraya Megah - Indonesia
- Bukit Baiduri Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Pendopo Energi Batubara - Indonesia
- Vizag Seaport Private Limited - India
- Jaiprakash Power Ventures ltd
- MS Steel International - UAE
- PNOC Exploration Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Coastal Gujarat Power Limited - India
- Vedanta Resources Plc - India
- Sojitz Corporation - Japan
- Kartika Selabumi Mining - Indonesia
- Indonesian Coal Mining Association
- Electricity Generating Authority of Thailand
- Siam City Cement - Thailand
- Mercuria Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- TeaM Sual Corporation - Philippines
- Power Finance Corporation Ltd., India
- Meralco Power Generation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Tata Chemicals Ltd - India
- South Luzon Thermal Energy Corporation
- Savvy Resources Ltd - HongKong
- Malabar Cements Ltd - India
- Binh Thuan Hamico - Vietnam
- Krishnapatnam Port Company Ltd. - India
- Rashtriya Ispat Nigam Limited - India
- Standard Chartered Bank - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Central Electricity Authority - India
- Vijayanagar Sugar Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Georgia Ports Authority, United States
- Mjunction Services Limited - India
- Directorate Of Revenue Intelligence - India
- Commonwealth Bank - Australia
- Marubeni Corporation - India
- Kaltim Prima Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- Interocean Group of Companies - India
- Kohat Cement Company Ltd. - Pakistan
- Goldman Sachs - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Toyota Tsusho Corporation, Japan
- PTC India Limited - India
- Petron Corporation, Philippines
- Orica Mining Services - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Jindal Steel & Power Ltd - India
- Baramulti Group, Indonesia
- Kumho Petrochemical, South Korea
- Leighton Contractors Pty Ltd - Australia
- Independent Power Producers Association of India
- Timah Investasi Mineral - Indoneisa
- Madhucon Powers Ltd - India
- Global Business Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ind-Barath Power Infra Limited - India
- Tamil Nadu electricity Board
- Simpson Spence & Young - Indonesia
- Port Waratah Coal Services - Australia
- VISA Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Aboitiz Power Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Minerals Council of Australia
- Indian Energy Exchange, India
- Indian Oil Corporation Limited
- Billiton Holdings Pty Ltd - Australia
- Sinarmas Energy and Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- White Energy Company Limited
- Australian Commodity Traders Exchange
- Kideco Jaya Agung - Indonesia
- Orica Australia Pty. Ltd.
- Romanian Commodities Exchange
- Uttam Galva Steels Limited - India
- Coalindo Energy - Indonesia
- Latin American Coal - Colombia
- Karbindo Abesyapradhi - Indoneisa
- India Bulls Power Limited - India
- Ministry of Transport, Egypt
- OPG Power Generation Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Meenaskhi Energy Private Limited - India
- Dalmia Cement Bharat India
- CIMB Investment Bank - Malaysia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sindya Power Generating Company Private Ltd
- Wilmar Investment Holdings
- Asmin Koalindo Tuhup - Indonesia
- Alfred C Toepfer International GmbH - Germany
- GAC Shipping (India) Pvt Ltd
- Global Green Power PLC Corporation, Philippines
- Sical Logistics Limited - India
- Economic Council, Georgia
- The Treasury - Australian Government
- Pipit Mutiara Jaya. PT, Indonesia
- Antam Resourcindo - Indonesia
- Australian Coal Association
- Barasentosa Lestari - Indonesia
- IHS Mccloskey Coal Group - USA
- Ministry of Finance - Indonesia
- Ambuja Cements Ltd - India
- Riau Bara Harum - Indonesia
- Samtan Co., Ltd - South Korea
- Energy Link Ltd, New Zealand
- Indogreen Group - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- SMG Consultants - Indonesia
- Cement Manufacturers Association - India
- Posco Energy - South Korea
- Eastern Energy - Thailand
- Sarangani Energy Corporation, Philippines
- Mintek Dendrill Indonesia
- Gujarat Electricity Regulatory Commission - India
- PowerSource Philippines DevCo
- Manunggal Multi Energi - Indonesia
- Sakthi Sugars Limited - India
- Grasim Industreis Ltd - India
- Bangladesh Power Developement Board
- Ceylon Electricity Board - Sri Lanka
- IEA Clean Coal Centre - UK
- Jorong Barutama Greston.PT - Indonesia
- Agrawal Coal Company - India
- Kobexindo Tractors - Indoneisa
- McConnell Dowell - Australia
- Singapore Mercantile Exchange
- Gujarat Mineral Development Corp Ltd - India
- Videocon Industries ltd - India
- SN Aboitiz Power Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Central Java Power - Indonesia
- CNBM International Corporation - China
- Xindia Steels Limited - India
- Electricity Authority, New Zealand
- Oldendorff Carriers - Singapore
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