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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, 26 May 22
MARKET INSIGHT - INTERMODAL
The newbuilding market activity has been significantly positive from a dry bulk owner perspective during the first half of 2022. Indeed, the contra ...
Wednesday, 18 May 22
INDONESIAN COAL PRICE REFERENCE DROPPED 4.42% IN MAY
COALspot.com: Indonesian Coal Price Reference for May delivery drops 4.42 per cent month on month.
The Indonesian Coal Price Referen ...
Thursday, 12 May 22
MARKET INSIGHT - INTERMODAL
Almost through half of the year, the overall shipping market continues to show signs of healthiness, after plenty of festivities and holidays that ...
Wednesday, 27 April 22
EUROPEAN UNION'S LNG IMPORTS - BANCHERO COSTA
In 2021, the European Union (27) was the third largest seaborne importer of LNG in the world, with a 15.8% share.
It followed Mainla ...
Tuesday, 26 April 22
CHINA'S APPETITE FOR BAUXITE HITS NEW RECORD AS Q1 IMPORTS JUMP 15.4% Y/Y - BIMCO
Bauxite shipments arriving in China hit new record levels in the first quarter of 2022 and grew at an average annual rate of 12.8% between 2017 and ...
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- Ministry of Transport, Egypt
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- Mercuria Energy - Indonesia
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- Kumho Petrochemical, South Korea
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- Tamil Nadu electricity Board
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- AsiaOL BioFuels Corp., Philippines
- IEA Clean Coal Centre - UK
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- Toyota Tsusho Corporation, Japan
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- Planning Commission, India
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- Mjunction Services Limited - India
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- Therma Luzon, Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Kalimantan Lumbung Energi - Indonesia
- Electricity Generating Authority of Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Barasentosa Lestari - Indonesia
- Indogreen Group - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Africa Commodities Group - South Africa
- Maharashtra Electricity Regulatory Commission - India
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- Vedanta Resources Plc - India
- San Jose City I Power Corp, Philippines
- Port Waratah Coal Services - Australia
- Australian Coal Association
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- The University of Queensland
- Energy Link Ltd, New Zealand
- Power Finance Corporation Ltd., India
- Ministry of Finance - Indonesia
- Coal and Oil Company - UAE
- Indian Oil Corporation Limited
- SMC Global Power, Philippines
- LBH Netherlands Bv - Netherlands
- International Coal Ventures Pvt Ltd - India
- Larsen & Toubro Limited - India
- Price Waterhouse Coopers - Russia
- Pipit Mutiara Jaya. PT, Indonesia
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- Bulk Trading Sa - Switzerland
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- Global Green Power PLC Corporation, Philippines
- Indika Energy - Indonesia
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- GN Power Mariveles Coal Plant, Philippines
- Orica Mining Services - Indonesia
- GVK Power & Infra Limited - India
- IHS Mccloskey Coal Group - USA
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- Baramulti Group, Indonesia
- White Energy Company Limited
- Chettinad Cement Corporation Ltd - India
- Romanian Commodities Exchange
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- PNOC Exploration Corporation - Philippines
- MS Steel International - UAE
- Carbofer General Trading SA - India
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- Georgia Ports Authority, United States
- Straits Asia Resources Limited - Singapore
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- Bank of Tokyo Mitsubishi UFJ Ltd
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- New Zealand Coal & Carbon
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- Bukit Asam (Persero) Tbk - Indonesia
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- PowerSource Philippines DevCo
- Videocon Industries ltd - India
- Dalmia Cement Bharat India
- Rio Tinto Coal - Australia
- Kaltim Prima Coal - Indonesia
- Samtan Co., Ltd - South Korea
- Ceylon Electricity Board - Sri Lanka
- Gujarat Sidhee Cement - India
- ASAPP Information Group - India
- Bhatia International Limited - India
- Electricity Authority, New Zealand
- Bharathi Cement Corporation - India
- Grasim Industreis Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- VISA Power Limited - India
- Bukit Makmur.PT - Indonesia
- Economic Council, Georgia
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- Essar Steel Hazira Ltd - India
- Wilmar Investment Holdings
- Billiton Holdings Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- Rashtriya Ispat Nigam Limited - India
- Gujarat Mineral Development Corp Ltd - India
- The State Trading Corporation of India Ltd
- London Commodity Brokers - England
- Sinarmas Energy and Mining - Indonesia
- Tata Chemicals Ltd - India
- Sojitz Corporation - Japan
- Karaikal Port Pvt Ltd - India
- Eastern Coal Council - USA
- Intertek Mineral Services - Indonesia
- Orica Australia Pty. Ltd.
- Directorate Of Revenue Intelligence - India
- Miang Besar Coal Terminal - Indonesia
- Salva Resources Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Borneo Indobara - Indonesia
- Merrill Lynch Commodities Europe
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- Australian Commodity Traders Exchange
- Semirara Mining Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Leighton Contractors Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- Metalloyd Limited - United Kingdom
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- Global Coal Blending Company Limited - Australia
- Coastal Gujarat Power Limited - India
- Coalindo Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Meralco Power Generation, Philippines
- Goldman Sachs - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Standard Chartered Bank - UAE
- Jorong Barutama Greston.PT - Indonesia
- Global Business Power Corporation, Philippines
- McConnell Dowell - Australia
- Anglo American - United Kingdom
- Eastern Energy - Thailand
- Cigading International Bulk Terminal - Indonesia
- Formosa Plastics Group - Taiwan
- The Treasury - Australian Government
- Kapuas Tunggal Persada - Indonesia
- Posco Energy - South Korea
- Kepco SPC Power Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Siam City Cement - Thailand
- Aboitiz Power Corporation - Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Commonwealth Bank - Australia
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- OPG Power Generation Pvt Ltd - India
- Indonesian Coal Mining Association
- PTC India Limited - India
- Siam City Cement PLC, Thailand
- Asmin Koalindo Tuhup - Indonesia
- Sarangani Energy Corporation, Philippines
- India Bulls Power Limited - India
- Cement Manufacturers Association - India
- Medco Energi Mining Internasional
- Independent Power Producers Association of India
- Star Paper Mills Limited - India
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