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