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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, 30 June 22
FINANCIAL GAINS SUPPORT COAL TRANSITION - BALTIC EXCHANGE
Support for the shift away from coal dependency continues to mount, with the International Monetary Fund (IMF) calculating that the move would gene ...
Thursday, 30 June 22
SPOT AUSTRALIAN THERMAL COAL HAS SURGED, BUT CONTRACT PRICE IS KEY - REUTERS
The spot price of Australian thermal coal is higher than that of coking coal, an unprecedented situation that highlights just how the global market ...
Thursday, 30 June 22
SHANXI PROVINCE RAISES ANNUAL COAL OUTPUT TO 1.3 BILLION TONS TO ENSURE CHINA’S ENERGY SUPPLY - GLOBAL TIMES
North China’s Shanxi Province, a major coal-producing region, recently announced a move to increase its annual coal production output by 107 ...
Thursday, 30 June 22
DIVERGENCE BETWEEN HIGH- AND LOW-GRADE THERMAL COAL PRICES IN APAC TO NARROW - FITCH RATINGS
Prices between high- and low-grade thermal coal in Asia-Pacific (APAC) have diverged since late March 2022, but Fitch Ratings expects the gap to na ...
Thursday, 30 June 22
INVESTMENT IN GLOBAL COAL SUPPLY CHAIN TO HIT $115 BN IN 2022, LED BY CHINA AND INDIA - BUSINESS LINE
At over $80 billion, China and India are anticipated to make up the bulk of global coal investment in 2022, says IEA.
The investment ...
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- Ministry of Transport, Egypt
- Ambuja Cements Ltd - India
- London Commodity Brokers - England
- The University of Queensland
- Posco Energy - South Korea
- Edison Trading Spa - Italy
- Krishnapatnam Port Company Ltd. - India
- Wilmar Investment Holdings
- Wood Mackenzie - Singapore
- Bukit Baiduri Energy - Indonesia
- San Jose City I Power Corp, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- ICICI Bank Limited - India
- Makarim & Taira - Indonesia
- Sojitz Corporation - Japan
- Deloitte Consulting - India
- Kapuas Tunggal Persada - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- CIMB Investment Bank - Malaysia
- Planning Commission, India
- Indian Energy Exchange, India
- Salva Resources Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Billiton Holdings Pty Ltd - Australia
- Maheswari Brothers Coal Limited - India
- SMC Global Power, Philippines
- Jaiprakash Power Ventures ltd
- Africa Commodities Group - South Africa
- Altura Mining Limited, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Ministry of Finance - Indonesia
- Coalindo Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- Australian Commodity Traders Exchange
- The State Trading Corporation of India Ltd
- Indian Oil Corporation Limited
- Dalmia Cement Bharat India
- Chettinad Cement Corporation Ltd - India
- Interocean Group of Companies - India
- Vizag Seaport Private Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Rio Tinto Coal - Australia
- Antam Resourcindo - Indonesia
- Petron Corporation, Philippines
- Electricity Authority, New Zealand
- Parliament of New Zealand
- Xindia Steels Limited - India
- CNBM International Corporation - China
- Intertek Mineral Services - Indonesia
- Videocon Industries ltd - India
- Merrill Lynch Commodities Europe
- Star Paper Mills Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Globalindo Alam Lestari - Indonesia
- Eastern Energy - Thailand
- Tamil Nadu electricity Board
- Essar Steel Hazira Ltd - India
- Georgia Ports Authority, United States
- Australian Coal Association
- GMR Energy Limited - India
- Coastal Gujarat Power Limited - India
- The Treasury - Australian Government
- OPG Power Generation Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Bukit Makmur.PT - Indonesia
- Bharathi Cement Corporation - India
- Semirara Mining Corp, Philippines
- Kaltim Prima Coal - Indonesia
- Therma Luzon, Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- Tata Chemicals Ltd - India
- Anglo American - United Kingdom
- Kumho Petrochemical, South Korea
- Borneo Indobara - Indonesia
- Kartika Selabumi Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Karaikal Port Pvt Ltd - India
- Bhatia International Limited - India
- Oldendorff Carriers - Singapore
- Bayan Resources Tbk. - Indonesia
- Romanian Commodities Exchange
- Orica Australia Pty. Ltd.
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mjunction Services Limited - India
- New Zealand Coal & Carbon
- Madhucon Powers Ltd - India
- IHS Mccloskey Coal Group - USA
- Neyveli Lignite Corporation Ltd, - India
- Aditya Birla Group - India
- Rashtriya Ispat Nigam Limited - India
- Global Coal Blending Company Limited - Australia
- Indika Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Bangladesh Power Developement Board
- Coal and Oil Company - UAE
- Jorong Barutama Greston.PT - Indonesia
- Kideco Jaya Agung - Indonesia
- Mercator Lines Limited - India
- Parry Sugars Refinery, India
- Uttam Galva Steels Limited - India
- Port Waratah Coal Services - Australia
- Simpson Spence & Young - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Agrawal Coal Company - India
- Toyota Tsusho Corporation, Japan
- Binh Thuan Hamico - Vietnam
- Timah Investasi Mineral - Indoneisa
- SMG Consultants - Indonesia
- Mintek Dendrill Indonesia
- Indonesian Coal Mining Association
- PNOC Exploration Corporation - Philippines
- Metalloyd Limited - United Kingdom
- Central Electricity Authority - India
- Latin American Coal - Colombia
- Mercuria Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Renaissance Capital - South Africa
- Cement Manufacturers Association - India
- Savvy Resources Ltd - HongKong
- Lanco Infratech Ltd - India
- Economic Council, Georgia
- Manunggal Multi Energi - Indonesia
- Commonwealth Bank - Australia
- LBH Netherlands Bv - Netherlands
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Goldman Sachs - Singapore
- Siam City Cement - Thailand
- Baramulti Group, Indonesia
- VISA Power Limited - India
- Bulk Trading Sa - Switzerland
- Ministry of Mines - Canada
- Minerals Council of Australia
- Gujarat Electricity Regulatory Commission - India
- McConnell Dowell - Australia
- Sree Jayajothi Cements Limited - India
- Ceylon Electricity Board - Sri Lanka
- Barasentosa Lestari - Indonesia
- Sical Logistics Limited - India
- Larsen & Toubro Limited - India
- Meralco Power Generation, Philippines
- Independent Power Producers Association of India
- Holcim Trading Pte Ltd - Singapore
- Indo Tambangraya Megah - Indonesia
- Semirara Mining and Power Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Central Java Power - Indonesia
- Sindya Power Generating Company Private Ltd
- Karbindo Abesyapradhi - Indoneisa
- Bahari Cakrawala Sebuku - Indonesia
- Bhushan Steel Limited - India
- Indogreen Group - Indonesia
- TeaM Sual Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- White Energy Company Limited
- Heidelberg Cement - Germany
- Straits Asia Resources Limited - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Attock Cement Pakistan Limited
- ASAPP Information Group - India
- Energy Development Corp, Philippines
- Orica Mining Services - Indonesia
- Sakthi Sugars Limited - India
- PowerSource Philippines DevCo
- Gujarat Sidhee Cement - India
- Kobexindo Tractors - Indoneisa
- Thai Mozambique Logistica
- Eastern Coal Council - USA
- Thiess Contractors Indonesia
- Power Finance Corporation Ltd., India
- Chamber of Mines of South Africa
- PTC India Limited - India
- Ind-Barath Power Infra Limited - India
- AsiaOL BioFuels Corp., Philippines
- Grasim Industreis Ltd - India
- Trasteel International SA, Italy
- Iligan Light & Power Inc, Philippines
- Price Waterhouse Coopers - Russia
- Singapore Mercantile Exchange
- Miang Besar Coal Terminal - Indonesia
- Formosa Plastics Group - Taiwan
- Sarangani Energy Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- India Bulls Power Limited - India
- Siam City Cement PLC, Thailand
- Sinarmas Energy and Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Pendopo Energi Batubara - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Global Business Power Corporation, Philippines
- IEA Clean Coal Centre - UK
- Asmin Koalindo Tuhup - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- Standard Chartered Bank - UAE
- Kepco SPC Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- GVK Power & Infra Limited - India
- MS Steel International - UAE
- Malabar Cements Ltd - India
- Vedanta Resources Plc - India
- Directorate Of Revenue Intelligence - India
- Kohat Cement Company Ltd. - Pakistan
- Leighton Contractors Pty Ltd - Australia
- Carbofer General Trading SA - India
- Samtan Co., Ltd - South Korea
- Medco Energi Mining Internasional
- Marubeni Corporation - India
- Banpu Public Company Limited - Thailand
- Electricity Generating Authority of Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Riau Bara Harum - Indonesia
- Bhoruka Overseas - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Global Green Power PLC Corporation, Philippines
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