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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, 03 February 22
COAL SHORTAGE NOW AT ALARMING LEVELS, SAY ALUMINIUM PRODUCERS - IANS
With no relief in sight despite coal stocks running critically low and production disruptions looming across the Indian aluminium sector, the Alumi ...
Wednesday, 02 February 22
HIGH COKING COAL PRICES PROVIDE GLIMPSE INTO STEELMAKING'S FUTURE - MCKINSEY
Last year was a volatile one in global commodity markets. Demand for coking coal, an essential raw material in the production of steel, was extreme ...
Wednesday, 02 February 22
INDONESIA'S RESTRICTIONS ON COMMODITIES RATTLE MARKETS, MORE MOVES LIKELY - REUTERS
In just the first month of this year, Indonesian policymakers have rattled global markets with restrictions on some of its biggest commodities expo ...
Wednesday, 02 February 22
CHINA'S TOP COAL PRODUCER FORECASTS 28 PCT PROFIT GROWTH IN 2021 - XINHUA
China Shenhua Energy Company Limited, one of the country’s biggest coal producers, said its net profits are expected to jump by 28 percent in ...
Wednesday, 02 February 22
COAL STORAGE IN CHINA’S POWER PLANTS NEAR RECORD HIGHS - XINHUA
Coal inflows into China’s power plants have picked up, bringing their coal storage to near record highs, the National Development and Reform ...
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- South Luzon Thermal Energy Corporation
- Rashtriya Ispat Nigam Limited - India
- Chettinad Cement Corporation Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Heidelberg Cement - Germany
- Grasim Industreis Ltd - India
- Marubeni Corporation - India
- Indo Tambangraya Megah - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- McConnell Dowell - Australia
- Coal and Oil Company - UAE
- Romanian Commodities Exchange
- Asmin Koalindo Tuhup - Indonesia
- Timah Investasi Mineral - Indoneisa
- Iligan Light & Power Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Attock Cement Pakistan Limited
- Star Paper Mills Limited - India
- Essar Steel Hazira Ltd - India
- Formosa Plastics Group - Taiwan
- Mintek Dendrill Indonesia
- Sindya Power Generating Company Private Ltd
- AsiaOL BioFuels Corp., Philippines
- Neyveli Lignite Corporation Ltd, - India
- Goldman Sachs - Singapore
- ASAPP Information Group - India
- Oldendorff Carriers - Singapore
- The State Trading Corporation of India Ltd
- Aboitiz Power Corporation - Philippines
- Jaiprakash Power Ventures ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Singapore Mercantile Exchange
- Gujarat Electricity Regulatory Commission - India
- Bukit Makmur.PT - Indonesia
- Sical Logistics Limited - India
- Bulk Trading Sa - Switzerland
- Wood Mackenzie - Singapore
- Salva Resources Pvt Ltd - India
- Africa Commodities Group - South Africa
- PTC India Limited - India
- Riau Bara Harum - Indonesia
- Orica Mining Services - Indonesia
- Sarangani Energy Corporation, Philippines
- Australian Commodity Traders Exchange
- IHS Mccloskey Coal Group - USA
- Power Finance Corporation Ltd., India
- Semirara Mining Corp, Philippines
- Videocon Industries ltd - India
- Chamber of Mines of South Africa
- IEA Clean Coal Centre - UK
- CIMB Investment Bank - Malaysia
- Bharathi Cement Corporation - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Gujarat Sidhee Cement - India
- GAC Shipping (India) Pvt Ltd
- Jorong Barutama Greston.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- PNOC Exploration Corporation - Philippines
- Mercuria Energy - Indonesia
- Siam City Cement PLC, Thailand
- San Jose City I Power Corp, Philippines
- Interocean Group of Companies - India
- Tata Chemicals Ltd - India
- Manunggal Multi Energi - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Xindia Steels Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Leighton Contractors Pty Ltd - Australia
- Mjunction Services Limited - India
- New Zealand Coal & Carbon
- Malabar Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Renaissance Capital - South Africa
- Agrawal Coal Company - India
- Indian Energy Exchange, India
- Karbindo Abesyapradhi - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Ambuja Cements Ltd - India
- TeaM Sual Corporation - Philippines
- Parry Sugars Refinery, India
- Miang Besar Coal Terminal - Indonesia
- Ministry of Transport, Egypt
- Kalimantan Lumbung Energi - Indonesia
- Indogreen Group - Indonesia
- Minerals Council of Australia
- Simpson Spence & Young - Indonesia
- CNBM International Corporation - China
- GMR Energy Limited - India
- Bukit Baiduri Energy - Indonesia
- Ministry of Finance - Indonesia
- Kaltim Prima Coal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Maheswari Brothers Coal Limited - India
- Latin American Coal - Colombia
- Posco Energy - South Korea
- Toyota Tsusho Corporation, Japan
- Semirara Mining and Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Electricity Authority, New Zealand
- Borneo Indobara - Indonesia
- Wilmar Investment Holdings
- PetroVietnam Power Coal Import and Supply Company
- Thiess Contractors Indonesia
- Binh Thuan Hamico - Vietnam
- Antam Resourcindo - Indonesia
- Energy Development Corp, Philippines
- Economic Council, Georgia
- Indika Energy - Indonesia
- Bangladesh Power Developement Board
- Thai Mozambique Logistica
- Central Java Power - Indonesia
- Indonesian Coal Mining Association
- Coalindo Energy - Indonesia
- Vizag Seaport Private Limited - India
- GVK Power & Infra Limited - India
- Standard Chartered Bank - UAE
- Jindal Steel & Power Ltd - India
- Altura Mining Limited, Indonesia
- Orica Australia Pty. Ltd.
- Bhushan Steel Limited - India
- London Commodity Brokers - England
- Edison Trading Spa - Italy
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Independent Power Producers Association of India
- Sinarmas Energy and Mining - Indonesia
- Metalloyd Limited - United Kingdom
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Carbofer General Trading SA - India
- Trasteel International SA, Italy
- Samtan Co., Ltd - South Korea
- SMG Consultants - Indonesia
- PowerSource Philippines DevCo
- Indian Oil Corporation Limited
- Global Business Power Corporation, Philippines
- SMC Global Power, Philippines
- Mercator Lines Limited - India
- Global Coal Blending Company Limited - Australia
- Kobexindo Tractors - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Cement Manufacturers Association - India
- Intertek Mineral Services - Indonesia
- Merrill Lynch Commodities Europe
- Karaikal Port Pvt Ltd - India
- Baramulti Group, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Tamil Nadu electricity Board
- Barasentosa Lestari - Indonesia
- Eastern Coal Council - USA
- Commonwealth Bank - Australia
- Directorate Of Revenue Intelligence - India
- Krishnapatnam Port Company Ltd. - India
- Energy Link Ltd, New Zealand
- India Bulls Power Limited - India
- Makarim & Taira - Indonesia
- LBH Netherlands Bv - Netherlands
- Deloitte Consulting - India
- Globalindo Alam Lestari - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- White Energy Company Limited
- International Coal Ventures Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Lanco Infratech Ltd - India
- Price Waterhouse Coopers - Russia
- Pendopo Energi Batubara - Indonesia
- Vedanta Resources Plc - India
- Australian Coal Association
- The Treasury - Australian Government
- Larsen & Toubro Limited - India
- Kumho Petrochemical, South Korea
- Rio Tinto Coal - Australia
- Siam City Cement - Thailand
- Straits Asia Resources Limited - Singapore
- Bayan Resources Tbk. - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- VISA Power Limited - India
- Aditya Birla Group - India
- Vijayanagar Sugar Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- ICICI Bank Limited - India
- Bhoruka Overseas - Indonesia
- Banpu Public Company Limited - Thailand
- Planning Commission, India
- Sojitz Corporation - Japan
- Electricity Generating Authority of Thailand
- The University of Queensland
- Dalmia Cement Bharat India
- SN Aboitiz Power Inc, Philippines
- MS Steel International - UAE
- TNB Fuel Sdn Bhd - Malaysia
- Petrochimia International Co. Ltd.- Taiwan
- Central Electricity Authority - India
- Ministry of Mines - Canada
- Kepco SPC Power Corporation, Philippines
- Petron Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Anglo American - United Kingdom
- Sree Jayajothi Cements Limited - India
- Global Green Power PLC Corporation, Philippines
- Parliament of New Zealand
- Uttam Galva Steels Limited - India
- Sakthi Sugars Limited - India
- Eastern Energy - Thailand
- Port Waratah Coal Services - Australia
- Bhatia International Limited - India
- Meenaskhi Energy Private Limited - India
- Meralco Power Generation, Philippines
- Madhucon Powers Ltd - India
- Kartika Selabumi Mining - Indonesia
- Coastal Gujarat Power Limited - India
- Therma Luzon, Inc, Philippines
- Georgia Ports Authority, United States
- European Bulk Services B.V. - Netherlands
- Medco Energi Mining Internasional
- Billiton Holdings Pty Ltd - Australia
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