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