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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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- European Bulk Services B.V. - Netherlands
- Makarim & Taira - Indonesia
- Simpson Spence & Young - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- CNBM International Corporation - China
- Sarangani Energy Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Deloitte Consulting - India
- Metalloyd Limited - United Kingdom
- Indian Oil Corporation Limited
- Formosa Plastics Group - Taiwan
- IEA Clean Coal Centre - UK
- Neyveli Lignite Corporation Ltd, - India
- Orica Australia Pty. Ltd.
- The University of Queensland
- Bayan Resources Tbk. - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Dalmia Cement Bharat India
- Australian Coal Association
- Petrochimia International Co. Ltd.- Taiwan
- Cigading International Bulk Terminal - Indonesia
- Jindal Steel & Power Ltd - India
- Coastal Gujarat Power Limited - India
- Karaikal Port Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Riau Bara Harum - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Bahari Cakrawala Sebuku - Indonesia
- Carbofer General Trading SA - India
- Sojitz Corporation - Japan
- Banpu Public Company Limited - Thailand
- ASAPP Information Group - India
- TeaM Sual Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Global Green Power PLC Corporation, Philippines
- London Commodity Brokers - England
- Timah Investasi Mineral - Indoneisa
- Interocean Group of Companies - India
- Eastern Energy - Thailand
- Trasteel International SA, Italy
- VISA Power Limited - India
- Australian Commodity Traders Exchange
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhatia International Limited - India
- Aditya Birla Group - India
- PTC India Limited - India
- Anglo American - United Kingdom
- Central Java Power - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- Bulk Trading Sa - Switzerland
- Standard Chartered Bank - UAE
- Ambuja Cements Ltd - India
- Chettinad Cement Corporation Ltd - India
- Meralco Power Generation, Philippines
- Thiess Contractors Indonesia
- Miang Besar Coal Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Rashtriya Ispat Nigam Limited - India
- Minerals Council of Australia
- Krishnapatnam Port Company Ltd. - India
- Vedanta Resources Plc - India
- White Energy Company Limited
- Holcim Trading Pte Ltd - Singapore
- Bhoruka Overseas - Indonesia
- Sree Jayajothi Cements Limited - India
- Kideco Jaya Agung - Indonesia
- Georgia Ports Authority, United States
- Orica Mining Services - Indonesia
- Medco Energi Mining Internasional
- Barasentosa Lestari - Indonesia
- Indonesian Coal Mining Association
- Salva Resources Pvt Ltd - India
- Petron Corporation, Philippines
- Wood Mackenzie - Singapore
- Kartika Selabumi Mining - Indonesia
- Essar Steel Hazira Ltd - India
- Mercator Lines Limited - India
- Parliament of New Zealand
- The State Trading Corporation of India Ltd
- ICICI Bank Limited - India
- Wilmar Investment Holdings
- OPG Power Generation Pvt Ltd - India
- Altura Mining Limited, Indonesia
- International Coal Ventures Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Ceylon Electricity Board - Sri Lanka
- Videocon Industries ltd - India
- Siam City Cement PLC, Thailand
- Coal and Oil Company - UAE
- Energy Link Ltd, New Zealand
- Electricity Authority, New Zealand
- AsiaOL BioFuels Corp., Philippines
- Lanco Infratech Ltd - India
- Sindya Power Generating Company Private Ltd
- Indogreen Group - Indonesia
- Indian Energy Exchange, India
- Meenaskhi Energy Private Limited - India
- The Treasury - Australian Government
- SN Aboitiz Power Inc, Philippines
- Posco Energy - South Korea
- Directorate General of MIneral and Coal - Indonesia
- Malabar Cements Ltd - India
- PowerSource Philippines DevCo
- Semirara Mining and Power Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Romanian Commodities Exchange
- Goldman Sachs - Singapore
- Economic Council, Georgia
- Global Business Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Kumho Petrochemical, South Korea
- Kepco SPC Power Corporation, Philippines
- Ministry of Finance - Indonesia
- Latin American Coal - Colombia
- PetroVietnam Power Coal Import and Supply Company
- Maheswari Brothers Coal Limited - India
- Mintek Dendrill Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- New Zealand Coal & Carbon
- Cement Manufacturers Association - India
- Siam City Cement - Thailand
- Parry Sugars Refinery, India
- Renaissance Capital - South Africa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Central Electricity Authority - India
- Oldendorff Carriers - Singapore
- Iligan Light & Power Inc, Philippines
- Ministry of Transport, Egypt
- Intertek Mineral Services - Indonesia
- Global Coal Blending Company Limited - Australia
- Commonwealth Bank - Australia
- Marubeni Corporation - India
- Savvy Resources Ltd - HongKong
- Coalindo Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- South Luzon Thermal Energy Corporation
- Jorong Barutama Greston.PT - Indonesia
- Power Finance Corporation Ltd., India
- McConnell Dowell - Australia
- Bukit Baiduri Energy - Indonesia
- MS Steel International - UAE
- Manunggal Multi Energi - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Star Paper Mills Limited - India
- PNOC Exploration Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Sakthi Sugars Limited - India
- Eastern Coal Council - USA
- Africa Commodities Group - South Africa
- Ind-Barath Power Infra Limited - India
- CIMB Investment Bank - Malaysia
- GMR Energy Limited - India
- Directorate Of Revenue Intelligence - India
- Straits Asia Resources Limited - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Pendopo Energi Batubara - Indonesia
- SMC Global Power, Philippines
- Gujarat Sidhee Cement - India
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Mines - Canada
- Sical Logistics Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Vizag Seaport Private Limited - India
- Samtan Co., Ltd - South Korea
- Tamil Nadu electricity Board
- Pipit Mutiara Jaya. PT, Indonesia
- GAC Shipping (India) Pvt Ltd
- Antam Resourcindo - Indonesia
- Therma Luzon, Inc, Philippines
- Energy Development Corp, Philippines
- Gujarat Electricity Regulatory Commission - India
- San Jose City I Power Corp, Philippines
- Mercuria Energy - Indonesia
- Port Waratah Coal Services - Australia
- Bukit Makmur.PT - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Edison Trading Spa - Italy
- Baramulti Group, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Bhushan Steel Limited - India
- Aboitiz Power Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Xindia Steels Limited - India
- Bangladesh Power Developement Board
- SMG Consultants - Indonesia
- Thai Mozambique Logistica
- GVK Power & Infra Limited - India
- Agrawal Coal Company - India
- Tata Chemicals Ltd - India
- Jaiprakash Power Ventures ltd
- Bharathi Cement Corporation - India
- Electricity Generating Authority of Thailand
- Price Waterhouse Coopers - Russia
- Mjunction Services Limited - India
- Indika Energy - Indonesia
- Merrill Lynch Commodities Europe
- Attock Cement Pakistan Limited
- Heidelberg Cement - Germany
- Planning Commission, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Kapuas Tunggal Persada - Indonesia
- Borneo Indobara - Indonesia
- Indo Tambangraya Megah - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Uttam Galva Steels Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Rio Tinto Coal - Australia
- India Bulls Power Limited - India
- Independent Power Producers Association of India
- Singapore Mercantile Exchange
- Larsen & Toubro Limited - India
- Chamber of Mines of South Africa
- Grasim Industreis Ltd - India
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