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