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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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Wednesday, 29 June 22
LNG MARKET REMAINS TIGHT - INTERMODAL
LNG market remains tight currently, mainly driven by the US LNG outage from the recent fire in Freeport LNG terminal together with the recent fall ...
Wednesday, 29 June 22
CHINA'S NEW PLAN FOR RENEWABLE ENERGY DEVELOPMENT FOCUSES ON CONSUMPTION - FITCH RATINGS
China’s focus on consumption penetration for renewable energy development in its recently released 14th five-year plan – 2021 to 2025 & ...
Wednesday, 29 June 22
APAC CORPORATE SECTOR OUTLOOKS SHIFT AMID GLOBAL SHOCKS - FITCH RATINGS’
Fitch Ratings’ mid-2022 corporate sector outlook review revealed that the Asia-Pacific (APAC) region saw the largest number of sector outlook ...
Thursday, 16 June 22
MARKET INSIGHT - INTERMODAL
Picking up from my last insight in March, on the early days of the invasion, it's worth pointing out the way that the fast-paced working enviro ...
Saturday, 11 June 22
AIMTEK INTERNATIONAL CONFERENCE AND AWARDS
Press Release: The prestigious AIMTEK International Conference and Awards concluded successfully on June 7th, 2022 at Radisson Blu, Yas Island Abu ...
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- Xindia Steels Limited - India
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- Madhucon Powers Ltd - India
- Interocean Group of Companies - India
- Kaltim Prima Coal - Indonesia
- Meralco Power Generation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Commonwealth Bank - Australia
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- Heidelberg Cement - Germany
- Sarangani Energy Corporation, Philippines
- Thai Mozambique Logistica
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- Mercator Lines Limited - India
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- Parliament of New Zealand
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- Grasim Industreis Ltd - India
- Planning Commission, India
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- Therma Luzon, Inc, Philippines
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- New Zealand Coal & Carbon
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- TeaM Sual Corporation - Philippines
- Rio Tinto Coal - Australia
- Minerals Council of Australia
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- Semirara Mining and Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coalindo Energy - Indonesia
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- Goldman Sachs - Singapore
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- AsiaOL BioFuels Corp., Philippines
- Leighton Contractors Pty Ltd - Australia
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- Trasteel International SA, Italy
- Sindya Power Generating Company Private Ltd
- Deloitte Consulting - India
- Carbofer General Trading SA - India
- Essar Steel Hazira Ltd - India
- Georgia Ports Authority, United States
- Mjunction Services Limited - India
- Wood Mackenzie - Singapore
- Latin American Coal - Colombia
- Mercuria Energy - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- VISA Power Limited - India
- Bharathi Cement Corporation - India
- Marubeni Corporation - India
- Oldendorff Carriers - Singapore
- Price Waterhouse Coopers - Russia
- Mintek Dendrill Indonesia
- Metalloyd Limited - United Kingdom
- CIMB Investment Bank - Malaysia
- Eastern Energy - Thailand
- Toyota Tsusho Corporation, Japan
- GVK Power & Infra Limited - India
- Gujarat Electricity Regulatory Commission - India
- GAC Shipping (India) Pvt Ltd
- Meenaskhi Energy Private Limited - India
- Aditya Birla Group - India
- Petron Corporation, Philippines
- Baramulti Group, Indonesia
- Energy Development Corp, Philippines
- Renaissance Capital - South Africa
- McConnell Dowell - Australia
- MS Steel International - UAE
- Maheswari Brothers Coal Limited - India
- The Treasury - Australian Government
- Altura Mining Limited, Indonesia
- Borneo Indobara - Indonesia
- PNOC Exploration Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- India Bulls Power Limited - India
- Sree Jayajothi Cements Limited - India
- Australian Coal Association
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- Directorate Of Revenue Intelligence - India
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- Coal and Oil Company - UAE
- Iligan Light & Power Inc, Philippines
- Ministry of Finance - Indonesia
- Sojitz Corporation - Japan
- Indian Energy Exchange, India
- Star Paper Mills Limited - India
- Australian Commodity Traders Exchange
- Bhushan Steel Limited - India
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- TNB Fuel Sdn Bhd - Malaysia
- Sinarmas Energy and Mining - Indonesia
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- Parry Sugars Refinery, India
- Bukit Baiduri Energy - Indonesia
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- Thiess Contractors Indonesia
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- Bulk Trading Sa - Switzerland
- Merrill Lynch Commodities Europe
- Gujarat Mineral Development Corp Ltd - India
- Directorate General of MIneral and Coal - Indonesia
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- The State Trading Corporation of India Ltd
- Samtan Co., Ltd - South Korea
- Africa Commodities Group - South Africa
- Vijayanagar Sugar Pvt Ltd - India
- Dalmia Cement Bharat India
- Global Coal Blending Company Limited - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Manunggal Multi Energi - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- PTC India Limited - India
- Makarim & Taira - Indonesia
- GMR Energy Limited - India
- Indian Oil Corporation Limited
- Alfred C Toepfer International GmbH - Germany
- Jindal Steel & Power Ltd - India
- Eastern Coal Council - USA
- Siam City Cement - Thailand
- Tata Chemicals Ltd - India
- Independent Power Producers Association of India
- Lanco Infratech Ltd - India
- Chettinad Cement Corporation Ltd - India
- Port Waratah Coal Services - Australia
- Neyveli Lignite Corporation Ltd, - India
- Cement Manufacturers Association - India
- Barasentosa Lestari - Indonesia
- Salva Resources Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Indika Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Standard Chartered Bank - UAE
- Ceylon Electricity Board - Sri Lanka
- Sical Logistics Limited - India
- London Commodity Brokers - England
- Edison Trading Spa - Italy
- Orica Australia Pty. Ltd.
- Kideco Jaya Agung - Indonesia
- Ministry of Transport, Egypt
- Tamil Nadu electricity Board
- European Bulk Services B.V. - Netherlands
- Ministry of Mines - Canada
- CNBM International Corporation - China
- Global Green Power PLC Corporation, Philippines
- Siam City Cement PLC, Thailand
- Antam Resourcindo - Indonesia
- Central Java Power - Indonesia
- Power Finance Corporation Ltd., India
- International Coal Ventures Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Global Business Power Corporation, Philippines
- Singapore Mercantile Exchange
- Bhoruka Overseas - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Attock Cement Pakistan Limited
- ICICI Bank Limited - India
- IEA Clean Coal Centre - UK
- Electricity Generating Authority of Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Chamber of Mines of South Africa
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Sidhee Cement - India
- Simpson Spence & Young - Indonesia
- Videocon Industries ltd - India
- Sakthi Sugars Limited - India
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- Bank of Tokyo Mitsubishi UFJ Ltd
- Posco Energy - South Korea
- White Energy Company Limited
- IHS Mccloskey Coal Group - USA
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