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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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Thursday, 07 July 22
COAL INDIA'S PRODUCTION SETS RECORD INCREASE OF 29% YOY AT 36 MT IN Q1FY23 - IIFL SECURITIES
Coal India Limited (CIL) has ended April-June quarter FY’23 capping a historic high of 29% yoy output growth, compared to same quarter FY&rsq ...
Wednesday, 06 July 22
MARKET INSIGHT - INTERMODAL
Following the 3rd Decarbonizing Shipping Forum, held in Hamburg on June 2022, there has been a meaningful resurgence of discussions within the ship ...
Tuesday, 05 July 22
WHY ARE VLSFO PRICES SO HIGH, ESPECIALLY IN SINGAPORE? - STEVE CHRISTY, INTEGR8 FUELS
Tightness in products still trumps talks of recession
Last month we wrote about the fears of recession versus the tightness in product markets ...
Tuesday, 05 July 22
ADANI ENTERPRISES LOWEST BIDDER IN COAL INDIA'S IMPORT TENDER: REPORT - BUSINESS STANDARD
Coal India Ltd floated its first import tender on behalf of power companies, where Adani Enterprises Ltd came out to be the lowest bidder, a report ...
Tuesday, 05 July 22
CHINA POLICY KEY FOR IRON ORE OUTLOOK - ING
China’s covid lockdowns and recessionary risks hit iron ore
Iron ore prices have fallen significantly from their year-to-date high of US$ ...
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- Bharathi Cement Corporation - India
- White Energy Company Limited
- Ambuja Cements Ltd - India
- Riau Bara Harum - Indonesia
- Siam City Cement - Thailand
- MS Steel International - UAE
- Rio Tinto Coal - Australia
- Romanian Commodities Exchange
- Global Business Power Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Indian Energy Exchange, India
- Independent Power Producers Association of India
- Banpu Public Company Limited - Thailand
- Petron Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Videocon Industries ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Siam City Cement PLC, Thailand
- London Commodity Brokers - England
- Bank of Tokyo Mitsubishi UFJ Ltd
- SMC Global Power, Philippines
- Energy Development Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Indika Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Power Finance Corporation Ltd., India
- Kumho Petrochemical, South Korea
- Sakthi Sugars Limited - India
- The University of Queensland
- Posco Energy - South Korea
- Baramulti Group, Indonesia
- Planning Commission, India
- Meenaskhi Energy Private Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Indian Oil Corporation Limited
- Bukit Makmur.PT - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Minerals Council of Australia
- Parliament of New Zealand
- Bukit Baiduri Energy - Indonesia
- Medco Energi Mining Internasional
- International Coal Ventures Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Uttam Galva Steels Limited - India
- Kobexindo Tractors - Indoneisa
- Krishnapatnam Port Company Ltd. - India
- Pendopo Energi Batubara - Indonesia
- GAC Shipping (India) Pvt Ltd
- ASAPP Information Group - India
- Parry Sugars Refinery, India
- Maharashtra Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- Mintek Dendrill Indonesia
- The State Trading Corporation of India Ltd
- Thai Mozambique Logistica
- Jindal Steel & Power Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Xindia Steels Limited - India
- IHS Mccloskey Coal Group - USA
- Chamber of Mines of South Africa
- GVK Power & Infra Limited - India
- The Treasury - Australian Government
- Kideco Jaya Agung - Indonesia
- Interocean Group of Companies - India
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kohat Cement Company Ltd. - Pakistan
- Sindya Power Generating Company Private Ltd
- Electricity Generating Authority of Thailand
- Chettinad Cement Corporation Ltd - India
- Samtan Co., Ltd - South Korea
- CNBM International Corporation - China
- Heidelberg Cement - Germany
- Alfred C Toepfer International GmbH - Germany
- Iligan Light & Power Inc, Philippines
- Central Electricity Authority - India
- Rashtriya Ispat Nigam Limited - India
- Orica Australia Pty. Ltd.
- Salva Resources Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Mjunction Services Limited - India
- SMG Consultants - Indonesia
- Merrill Lynch Commodities Europe
- Indogreen Group - Indonesia
- Antam Resourcindo - Indonesia
- Wilmar Investment Holdings
- Coastal Gujarat Power Limited - India
- Larsen & Toubro Limited - India
- Essar Steel Hazira Ltd - India
- Intertek Mineral Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Sree Jayajothi Cements Limited - India
- Singapore Mercantile Exchange
- Formosa Plastics Group - Taiwan
- Directorate Of Revenue Intelligence - India
- Bulk Trading Sa - Switzerland
- Indonesian Coal Mining Association
- Gujarat Mineral Development Corp Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- San Jose City I Power Corp, Philippines
- Bhushan Steel Limited - India
- Coalindo Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Economic Council, Georgia
- Sojitz Corporation - Japan
- Electricity Authority, New Zealand
- Kaltim Prima Coal - Indonesia
- Jaiprakash Power Ventures ltd
- Gujarat Sidhee Cement - India
- Kepco SPC Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Vedanta Resources Plc - India
- Orica Mining Services - Indonesia
- Ind-Barath Power Infra Limited - India
- Metalloyd Limited - United Kingdom
- ICICI Bank Limited - India
- Australian Coal Association
- Tamil Nadu electricity Board
- Meralco Power Generation, Philippines
- Anglo American - United Kingdom
- GN Power Mariveles Coal Plant, Philippines
- Maheswari Brothers Coal Limited - India
- Oldendorff Carriers - Singapore
- Port Waratah Coal Services - Australia
- TeaM Sual Corporation - Philippines
- Therma Luzon, Inc, Philippines
- South Luzon Thermal Energy Corporation
- Marubeni Corporation - India
- PTC India Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Latin American Coal - Colombia
- Georgia Ports Authority, United States
- Bhoruka Overseas - Indonesia
- Cement Manufacturers Association - India
- Miang Besar Coal Terminal - Indonesia
- Central Java Power - Indonesia
- Madhucon Powers Ltd - India
- Wood Mackenzie - Singapore
- Semirara Mining Corp, Philippines
- Vizag Seaport Private Limited - India
- Renaissance Capital - South Africa
- Coal and Oil Company - UAE
- Commonwealth Bank - Australia
- Manunggal Multi Energi - Indonesia
- Malabar Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- Price Waterhouse Coopers - Russia
- Ceylon Electricity Board - Sri Lanka
- Makarim & Taira - Indonesia
- Binh Thuan Hamico - Vietnam
- Australian Commodity Traders Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Eastern Coal Council - USA
- Toyota Tsusho Corporation, Japan
- CIMB Investment Bank - Malaysia
- Bangladesh Power Developement Board
- Deloitte Consulting - India
- European Bulk Services B.V. - Netherlands
- Pipit Mutiara Jaya. PT, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Tata Chemicals Ltd - India
- Goldman Sachs - Singapore
- McConnell Dowell - Australia
- PowerSource Philippines DevCo
- Ministry of Mines - Canada
- Carbofer General Trading SA - India
- VISA Power Limited - India
- Indo Tambangraya Megah - Indonesia
- Ministry of Finance - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Borneo Indobara - Indonesia
- Barasentosa Lestari - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Mercuria Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bayan Resources Tbk. - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Eastern Energy - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- New Zealand Coal & Carbon
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- OPG Power Generation Pvt Ltd - India
- Sical Logistics Limited - India
- SN Aboitiz Power Inc, Philippines
- Altura Mining Limited, Indonesia
- GMR Energy Limited - India
- Global Coal Blending Company Limited - Australia
- IEA Clean Coal Centre - UK
- Mercator Lines Limited - India
- Leighton Contractors Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- Trasteel International SA, Italy
- Attock Cement Pakistan Limited
- Holcim Trading Pte Ltd - Singapore
- Lanco Infratech Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Asmin Koalindo Tuhup - Indonesia
- Bhatia International Limited - India
- Sinarmas Energy and Mining - Indonesia
- Savvy Resources Ltd - HongKong
- Grasim Industreis Ltd - India
- Cigading International Bulk Terminal - Indonesia
- India Bulls Power Limited - India
- Aboitiz Power Corporation - Philippines
- Energy Link Ltd, New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Aditya Birla Group - India
- Edison Trading Spa - Italy
- Africa Commodities Group - South Africa
- Dalmia Cement Bharat India
- Agrawal Coal Company - India
- Star Paper Mills Limited - India
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