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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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Tuesday, 05 April 22
INDONESIAN COAL PRICE REFERENCE HITS RECORD ABOVE $288
COALspot.com: Indonesian Coal Price Reference for April in a steep climb from March 2022.
As expected, Russia – Ukraine war dr ...
Thursday, 31 March 22
CHINA STATE PLANNER ASKS COAL INDEX PROVIDERS TO RECTIFY IRREGULARITIES - REUTERS
China’s state planner has asked some major coal price index providers to rectify “severe irregularities” it had identified in the ...
Thursday, 31 March 22
IMPORTED COAL PRICES TO JUMP 55% IN APR-JUN, IMPACT INDIAN FIRMS: ICRA - LIVEMINT
Supply disruption owing to the Russia-Ukraine conflict could push the price of imported coal by 45-55% in Q1FY23 compared to the previous quarter, ...
Thursday, 31 March 22
CHINA'S COAL OUTPUT SET FOR MODERATE GROWTH IN 2022 - INDUSTRY BODY - REUTERS
China is expected to see its coal output to grow further in 2022 after hitting a record last year, an industry body forecast on Wednesday, as the c ...
Tuesday, 29 March 22
MEMR OF INDONESIA HAS FIXED COAL PRICE AT US$ 90 PER TONNE FOR DOMESTIC INDUSTRIES EXCEPT SMELTER INDUSTRIES; FOR PLN USD 70 IS APPLICABLE
Minister of Energy and Mineral Resources (ESDM) Arifin Tasrif has set the selling price of coal for domestic, industrial except metal processing an ...
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- Edison Trading Spa - Italy
- Indogreen Group - Indonesia
- Standard Chartered Bank - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coal and Oil Company - UAE
- Deloitte Consulting - India
- Binh Thuan Hamico - Vietnam
- Holcim Trading Pte Ltd - Singapore
- McConnell Dowell - Australia
- Directorate Of Revenue Intelligence - India
- GN Power Mariveles Coal Plant, Philippines
- Pendopo Energi Batubara - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indian Energy Exchange, India
- Ceylon Electricity Board - Sri Lanka
- Kohat Cement Company Ltd. - Pakistan
- Savvy Resources Ltd - HongKong
- Wilmar Investment Holdings
- Africa Commodities Group - South Africa
- Agrawal Coal Company - India
- GVK Power & Infra Limited - India
- Straits Asia Resources Limited - Singapore
- Georgia Ports Authority, United States
- Indian Oil Corporation Limited
- Port Waratah Coal Services - Australia
- Kartika Selabumi Mining - Indonesia
- Ministry of Transport, Egypt
- GAC Shipping (India) Pvt Ltd
- Uttam Galva Steels Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- TeaM Sual Corporation - Philippines
- Mjunction Services Limited - India
- Power Finance Corporation Ltd., India
- Essar Steel Hazira Ltd - India
- Sakthi Sugars Limited - India
- Samtan Co., Ltd - South Korea
- Central Electricity Authority - India
- Iligan Light & Power Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Barasentosa Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- Eastern Coal Council - USA
- Sree Jayajothi Cements Limited - India
- Star Paper Mills Limited - India
- Gujarat Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Coalindo Energy - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- London Commodity Brokers - England
- Videocon Industries ltd - India
- Orica Australia Pty. Ltd.
- Sical Logistics Limited - India
- Madhucon Powers Ltd - India
- Borneo Indobara - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining Corp, Philippines
- Grasim Industreis Ltd - India
- White Energy Company Limited
- Ambuja Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Parliament of New Zealand
- PetroVietnam Power Coal Import and Supply Company
- Singapore Mercantile Exchange
- Renaissance Capital - South Africa
- Indo Tambangraya Megah - Indonesia
- Bhoruka Overseas - Indonesia
- Kaltim Prima Coal - Indonesia
- Electricity Generating Authority of Thailand
- Interocean Group of Companies - India
- Wood Mackenzie - Singapore
- Riau Bara Harum - Indonesia
- Planning Commission, India
- Economic Council, Georgia
- Offshore Bulk Terminal Pte Ltd, Singapore
- SMG Consultants - Indonesia
- Bangladesh Power Developement Board
- IEA Clean Coal Centre - UK
- Globalindo Alam Lestari - Indonesia
- Dalmia Cement Bharat India
- Marubeni Corporation - India
- Mercator Lines Limited - India
- Bhushan Steel Limited - India
- Petron Corporation, Philippines
- Medco Energi Mining Internasional
- CNBM International Corporation - China
- Siam City Cement PLC, Thailand
- Neyveli Lignite Corporation Ltd, - India
- Simpson Spence & Young - Indonesia
- Ministry of Mines - Canada
- Global Green Power PLC Corporation, Philippines
- Meralco Power Generation, Philippines
- San Jose City I Power Corp, Philippines
- Attock Cement Pakistan Limited
- Sindya Power Generating Company Private Ltd
- Indika Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Karaikal Port Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Altura Mining Limited, Indonesia
- VISA Power Limited - India
- Timah Investasi Mineral - Indoneisa
- PTC India Limited - India
- The Treasury - Australian Government
- Meenaskhi Energy Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Sarangani Energy Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Eastern Energy - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Makarim & Taira - Indonesia
- ASAPP Information Group - India
- Kideco Jaya Agung - Indonesia
- Ministry of Finance - Indonesia
- Tamil Nadu electricity Board
- PowerSource Philippines DevCo
- Global Business Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Romanian Commodities Exchange
- Chettinad Cement Corporation Ltd - India
- Energy Link Ltd, New Zealand
- Maheswari Brothers Coal Limited - India
- Price Waterhouse Coopers - Russia
- Kalimantan Lumbung Energi - Indonesia
- ICICI Bank Limited - India
- CIMB Investment Bank - Malaysia
- Bukit Makmur.PT - Indonesia
- OPG Power Generation Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Leighton Contractors Pty Ltd - Australia
- SN Aboitiz Power Inc, Philippines
- Tata Chemicals Ltd - India
- Sojitz Corporation - Japan
- Merrill Lynch Commodities Europe
- The State Trading Corporation of India Ltd
- IHS Mccloskey Coal Group - USA
- Posco Energy - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- Therma Luzon, Inc, Philippines
- Gujarat Sidhee Cement - India
- Vizag Seaport Private Limited - India
- New Zealand Coal & Carbon
- Cigading International Bulk Terminal - Indonesia
- Thiess Contractors Indonesia
- Coastal Gujarat Power Limited - India
- Anglo American - United Kingdom
- European Bulk Services B.V. - Netherlands
- Gujarat Mineral Development Corp Ltd - India
- Carbofer General Trading SA - India
- Jaiprakash Power Ventures ltd
- Larsen & Toubro Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Kobexindo Tractors - Indoneisa
- PNOC Exploration Corporation - Philippines
- Bhatia International Limited - India
- Manunggal Multi Energi - Indonesia
- Trasteel International SA, Italy
- Banpu Public Company Limited - Thailand
- Mercuria Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Indonesian Coal Mining Association
- Maharashtra Electricity Regulatory Commission - India
- Latin American Coal - Colombia
- Rio Tinto Coal - Australia
- Metalloyd Limited - United Kingdom
- Bayan Resources Tbk. - Indonesia
- Bharathi Cement Corporation - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Cement Manufacturers Association - India
- Bulk Trading Sa - Switzerland
- Electricity Authority, New Zealand
- Orica Mining Services - Indonesia
- MS Steel International - UAE
- Aditya Birla Group - India
- Australian Coal Association
- Minerals Council of Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Xindia Steels Limited - India
- GMR Energy Limited - India
- SMC Global Power, Philippines
- Commonwealth Bank - Australia
- Salva Resources Pvt Ltd - India
- Lanco Infratech Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Toyota Tsusho Corporation, Japan
- Jindal Steel & Power Ltd - India
- South Luzon Thermal Energy Corporation
- Independent Power Producers Association of India
- Kapuas Tunggal Persada - Indonesia
- Miang Besar Coal Terminal - Indonesia
- The University of Queensland
- International Coal Ventures Pvt Ltd - India
- Goldman Sachs - Singapore
- Baramulti Group, Indonesia
- Chamber of Mines of South Africa
- Malabar Cements Ltd - India
- Oldendorff Carriers - Singapore
- India Bulls Power Limited - India
- Central Java Power - Indonesia
- Parry Sugars Refinery, India
- Aboitiz Power Corporation - Philippines
- Heidelberg Cement - Germany
- LBH Netherlands Bv - Netherlands
- Energy Development Corp, Philippines
- Thai Mozambique Logistica
- Vedanta Resources Plc - India
- AsiaOL BioFuels Corp., Philippines
- Rashtriya Ispat Nigam Limited - India
- Ind-Barath Power Infra Limited - India
- Siam City Cement - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Australian Commodity Traders Exchange
- Intertek Mineral Services - Indonesia
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