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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, 08 March 22
THE HIGH COST OF INDONESIA’S DOWNSTREAM COAL PROJECTS IS UNDERESTIMATED - IEEFA
Three Indonesian ministries have come up with a DME purchase price of US$378/tonne fixed for 20 years compared to IEEFA’s US$601/tonne estima ...
Wednesday, 02 March 22
SHIPPING MARKET INSIGHT - INTERMODAL
The escalating confrontation between Russia and Ukraine has the potential to disrupt global order and set the world back a few decades. While count ...
Tuesday, 22 February 22
THE DRY BULK MARKET HAS MOVED ON A POSITIVE TRACK - ALLIED
The dry bulk market has moved on a positive track as of the past couple of weeks or so. Following the typical softening in freight conditions durin ...
Tuesday, 22 February 22
CHINA'S DAILY OUTPUT OF COAL REBOUNDS TO OVER 12 MLN TONNES - REUTERS
China’s coal output returned to more than 12 million tonnes per day as of Feb. 20, the country’s state planner said on Monday, a level ...
Thursday, 17 February 22
MAJOR INSTITUTIONS PROVIDED OVER $1.5 TRLN TO COAL SECTOR IN 2019-2021, SAYS NGO GROUP - REUTERS
Financial institutions channelled more than $1.5 trillion into the coal industry in loans and underwriting from January 2019 to November 2021, even ...
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- Lanco Infratech Ltd - India
- Maheswari Brothers Coal Limited - India
- Economic Council, Georgia
- Timah Investasi Mineral - Indoneisa
- Sojitz Corporation - Japan
- Chamber of Mines of South Africa
- Marubeni Corporation - India
- Georgia Ports Authority, United States
- Videocon Industries ltd - India
- Mjunction Services Limited - India
- Mintek Dendrill Indonesia
- Ministry of Finance - Indonesia
- SMC Global Power, Philippines
- Power Finance Corporation Ltd., India
- Coastal Gujarat Power Limited - India
- Agrawal Coal Company - India
- Straits Asia Resources Limited - Singapore
- Madhucon Powers Ltd - India
- Oldendorff Carriers - Singapore
- Parliament of New Zealand
- IEA Clean Coal Centre - UK
- CNBM International Corporation - China
- Miang Besar Coal Terminal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Transport, Egypt
- Indonesian Coal Mining Association
- Bharathi Cement Corporation - India
- Attock Cement Pakistan Limited
- Makarim & Taira - Indonesia
- Port Waratah Coal Services - Australia
- Africa Commodities Group - South Africa
- Global Coal Blending Company Limited - Australia
- Maharashtra Electricity Regulatory Commission - India
- Aboitiz Power Corporation - Philippines
- Vedanta Resources Plc - India
- Kaltim Prima Coal - Indonesia
- Xindia Steels Limited - India
- Iligan Light & Power Inc, Philippines
- Indian Energy Exchange, India
- Banpu Public Company Limited - Thailand
- Gujarat Sidhee Cement - India
- Sarangani Energy Corporation, Philippines
- Tata Chemicals Ltd - India
- Sakthi Sugars Limited - India
- Energy Development Corp, Philippines
- Kepco SPC Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Cement Manufacturers Association - India
- Coal and Oil Company - UAE
- Meralco Power Generation, Philippines
- Price Waterhouse Coopers - Russia
- Kalimantan Lumbung Energi - Indonesia
- Siam City Cement - Thailand
- Bulk Trading Sa - Switzerland
- Altura Mining Limited, Indonesia
- Kartika Selabumi Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- Singapore Mercantile Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Medco Energi Mining Internasional
- Semirara Mining Corp, Philippines
- Merrill Lynch Commodities Europe
- Wood Mackenzie - Singapore
- Rashtriya Ispat Nigam Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- McConnell Dowell - Australia
- Karbindo Abesyapradhi - Indoneisa
- Kideco Jaya Agung - Indonesia
- International Coal Ventures Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Thai Mozambique Logistica
- Kohat Cement Company Ltd. - Pakistan
- Central Java Power - Indonesia
- Barasentosa Lestari - Indonesia
- Global Green Power PLC Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Bukit Makmur.PT - Indonesia
- Petron Corporation, Philippines
- Jaiprakash Power Ventures ltd
- TeaM Sual Corporation - Philippines
- New Zealand Coal & Carbon
- Neyveli Lignite Corporation Ltd, - India
- Ind-Barath Power Infra Limited - India
- Dalmia Cement Bharat India
- Central Electricity Authority - India
- Ceylon Electricity Board - Sri Lanka
- Manunggal Multi Energi - Indonesia
- Indian Oil Corporation Limited
- Thiess Contractors Indonesia
- Kobexindo Tractors - Indoneisa
- IHS Mccloskey Coal Group - USA
- PNOC Exploration Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Romanian Commodities Exchange
- Trasteel International SA, Italy
- Renaissance Capital - South Africa
- Sree Jayajothi Cements Limited - India
- Commonwealth Bank - Australia
- Savvy Resources Ltd - HongKong
- Riau Bara Harum - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Sical Logistics Limited - India
- Planning Commission, India
- GMR Energy Limited - India
- Essar Steel Hazira Ltd - India
- Intertek Mineral Services - Indonesia
- San Jose City I Power Corp, Philippines
- Electricity Generating Authority of Thailand
- Aditya Birla Group - India
- Directorate Of Revenue Intelligence - India
- Anglo American - United Kingdom
- Metalloyd Limited - United Kingdom
- Sindya Power Generating Company Private Ltd
- Borneo Indobara - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Indogreen Group - Indonesia
- Australian Coal Association
- Malabar Cements Ltd - India
- Latin American Coal - Colombia
- GVK Power & Infra Limited - India
- Larsen & Toubro Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Samtan Co., Ltd - South Korea
- Bhatia International Limited - India
- Grasim Industreis Ltd - India
- Bangladesh Power Developement Board
- Deloitte Consulting - India
- AsiaOL BioFuels Corp., Philippines
- The Treasury - Australian Government
- Wilmar Investment Holdings
- Vizag Seaport Private Limited - India
- Australian Commodity Traders Exchange
- ASAPP Information Group - India
- OPG Power Generation Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Siam City Cement PLC, Thailand
- Pendopo Energi Batubara - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Simpson Spence & Young - Indonesia
- Star Paper Mills Limited - India
- Holcim Trading Pte Ltd - Singapore
- Leighton Contractors Pty Ltd - Australia
- MS Steel International - UAE
- Sinarmas Energy and Mining - Indonesia
- Heidelberg Cement - Germany
- Bhoruka Overseas - Indonesia
- CIMB Investment Bank - Malaysia
- India Bulls Power Limited - India
- The State Trading Corporation of India Ltd
- Gujarat Electricity Regulatory Commission - India
- London Commodity Brokers - England
- European Bulk Services B.V. - Netherlands
- VISA Power Limited - India
- Goldman Sachs - Singapore
- Standard Chartered Bank - UAE
- Eastern Energy - Thailand
- Independent Power Producers Association of India
- Minerals Council of Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Interocean Group of Companies - India
- Indo Tambangraya Megah - Indonesia
- Bhushan Steel Limited - India
- Electricity Authority, New Zealand
- Orica Mining Services - Indonesia
- SMG Consultants - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Globalindo Alam Lestari - Indonesia
- The University of Queensland
- PetroVietnam Power Coal Import and Supply Company
- TNB Fuel Sdn Bhd - Malaysia
- Bahari Cakrawala Sebuku - Indonesia
- Meenaskhi Energy Private Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Formosa Plastics Group - Taiwan
- Global Business Power Corporation, Philippines
- Baramulti Group, Indonesia
- Bukit Baiduri Energy - Indonesia
- Mercuria Energy - Indonesia
- PowerSource Philippines DevCo
- Ministry of Mines - Canada
- Chettinad Cement Corporation Ltd - India
- Coalindo Energy - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Parry Sugars Refinery, India
- Energy Link Ltd, New Zealand
- Indika Energy - Indonesia
- PTC India Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- LBH Netherlands Bv - Netherlands
- Uttam Galva Steels Limited - India
- Kumho Petrochemical, South Korea
- Carbofer General Trading SA - India
- White Energy Company Limited
- Edison Trading Spa - Italy
- SN Aboitiz Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Salva Resources Pvt Ltd - India
- Posco Energy - South Korea
- Krishnapatnam Port Company Ltd. - India
- South Luzon Thermal Energy Corporation
- Tamil Nadu electricity Board
- Semirara Mining and Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- GAC Shipping (India) Pvt Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Mercator Lines Limited - India
- ICICI Bank Limited - India
- Eastern Coal Council - USA
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kapuas Tunggal Persada - Indonesia
- Orica Australia Pty. Ltd.
- Rio Tinto Coal - Australia
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