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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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Wednesday, 02 February 22
MARKET INSIGHT - INTERMODAL
Oil prices have rallied to the highest level since October 2014 breaking above $90/bbl recently. November 2014 was the point when OPEC unleashed pr ...
Monday, 31 January 22
HOW INDONESIA'S COAL EXPORT BAN COULD IMPACT INDIA - IEEFA
What does it mean for power generation and energy security?
Not long ago, India faced coal shortages due to a decline in domestic co ...
Sunday, 30 January 22
AIR PRODUCTS' COAL GASIFICATION PROPOSAL TRIGGERS LOOMING POLICY DISPUTES IN INDONESIA - IEEFA
Plan to substitute Indonesia’s LPG imports with dimethyl ether may be hard to realize due to conflicting business interests
In ...
Sunday, 30 January 22
ENDGAME FOR NEW COAL POWER PROJECTS? - IEEFA INDIA
Retired coal units must be replaced only by assets that can provide grid flexibility
Reportedly, an expert committee appointed by th ...
Thursday, 27 January 22
2022 - A YEAR OF REBALANCING FOR METALS AND MINING - WOOD MACKENZIE
If 2021 was the year of rebound for metals and mining (M&M) commodities, then 2022 is shaping as the year of rebalance, says Wood Mackenzie, a ...
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- Posco Energy - South Korea
- VISA Power Limited - India
- Toyota Tsusho Corporation, Japan
- Standard Chartered Bank - UAE
- Electricity Authority, New Zealand
- Bukit Makmur.PT - Indonesia
- Deloitte Consulting - India
- Lanco Infratech Ltd - India
- GAC Shipping (India) Pvt Ltd
- India Bulls Power Limited - India
- Thiess Contractors Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Manunggal Multi Energi - Indonesia
- Interocean Group of Companies - India
- Meenaskhi Energy Private Limited - India
- Orica Australia Pty. Ltd.
- The State Trading Corporation of India Ltd
- Timah Investasi Mineral - Indoneisa
- Therma Luzon, Inc, Philippines
- Borneo Indobara - Indonesia
- Kumho Petrochemical, South Korea
- Larsen & Toubro Limited - India
- GMR Energy Limited - India
- European Bulk Services B.V. - Netherlands
- Port Waratah Coal Services - Australia
- Barasentosa Lestari - Indonesia
- SMC Global Power, Philippines
- Vedanta Resources Plc - India
- Altura Mining Limited, Indonesia
- Energy Link Ltd, New Zealand
- Semirara Mining Corp, Philippines
- Petron Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Karbindo Abesyapradhi - Indoneisa
- Krishnapatnam Port Company Ltd. - India
- PNOC Exploration Corporation - Philippines
- Goldman Sachs - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Sindya Power Generating Company Private Ltd
- Bangladesh Power Developement Board
- Neyveli Lignite Corporation Ltd, - India
- Maharashtra Electricity Regulatory Commission - India
- Ind-Barath Power Infra Limited - India
- Edison Trading Spa - Italy
- Africa Commodities Group - South Africa
- Global Coal Blending Company Limited - Australia
- Parliament of New Zealand
- Electricity Generating Authority of Thailand
- Dalmia Cement Bharat India
- Wilmar Investment Holdings
- Bukit Asam (Persero) Tbk - Indonesia
- Jindal Steel & Power Ltd - India
- Tata Chemicals Ltd - India
- Uttam Galva Steels Limited - India
- Siam City Cement - Thailand
- Central Electricity Authority - India
- Bukit Baiduri Energy - Indonesia
- Economic Council, Georgia
- Kideco Jaya Agung - Indonesia
- Meralco Power Generation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Madhucon Powers Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Salva Resources Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Transport, Egypt
- Essar Steel Hazira Ltd - India
- The University of Queensland
- Sakthi Sugars Limited - India
- Intertek Mineral Services - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Coastal Gujarat Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Attock Cement Pakistan Limited
- LBH Netherlands Bv - Netherlands
- San Jose City I Power Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Riau Bara Harum - Indonesia
- ASAPP Information Group - India
- Iligan Light & Power Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- Global Business Power Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Grasim Industreis Ltd - India
- Antam Resourcindo - Indonesia
- Pendopo Energi Batubara - Indonesia
- Central Java Power - Indonesia
- Power Finance Corporation Ltd., India
- Eastern Energy - Thailand
- Heidelberg Cement - Germany
- Vizag Seaport Private Limited - India
- Latin American Coal - Colombia
- Mjunction Services Limited - India
- TeaM Sual Corporation - Philippines
- Coalindo Energy - Indonesia
- Cement Manufacturers Association - India
- Agrawal Coal Company - India
- PowerSource Philippines DevCo
- Jorong Barutama Greston.PT - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Gujarat Sidhee Cement - India
- Mercator Lines Limited - India
- Minerals Council of Australia
- Sical Logistics Limited - India
- South Luzon Thermal Energy Corporation
- Medco Energi Mining Internasional
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Aditya Birla Group - India
- Bulk Trading Sa - Switzerland
- Bank of Tokyo Mitsubishi UFJ Ltd
- GVK Power & Infra Limited - India
- Ministry of Finance - Indonesia
- Holcim Trading Pte Ltd - Singapore
- OPG Power Generation Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Indonesian Coal Mining Association
- London Commodity Brokers - England
- Oldendorff Carriers - Singapore
- SN Aboitiz Power Inc, Philippines
- MS Steel International - UAE
- Xindia Steels Limited - India
- Straits Asia Resources Limited - Singapore
- Malabar Cements Ltd - India
- Ambuja Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mintek Dendrill Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Bharathi Cement Corporation - India
- Eastern Coal Council - USA
- New Zealand Coal & Carbon
- Tamil Nadu electricity Board
- Indian Oil Corporation Limited
- PTC India Limited - India
- Independent Power Producers Association of India
- Alfred C Toepfer International GmbH - Germany
- Metalloyd Limited - United Kingdom
- Thai Mozambique Logistica
- Makarim & Taira - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Orica Mining Services - Indonesia
- Globalindo Alam Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- Chettinad Cement Corporation Ltd - India
- Kepco SPC Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Energy Development Corp, Philippines
- Formosa Plastics Group - Taiwan
- Simpson Spence & Young - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Australian Coal Association
- White Energy Company Limited
- Romanian Commodities Exchange
- Sinarmas Energy and Mining - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Indogreen Group - Indonesia
- Bhoruka Overseas - Indonesia
- Star Paper Mills Limited - India
- Bayan Resources Tbk. - Indonesia
- Rio Tinto Coal - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Jaiprakash Power Ventures ltd
- Parry Sugars Refinery, India
- Australian Commodity Traders Exchange
- IEA Clean Coal Centre - UK
- Baramulti Group, Indonesia
- Sojitz Corporation - Japan
- Billiton Holdings Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- Ministry of Mines - Canada
- Kapuas Tunggal Persada - Indonesia
- Samtan Co., Ltd - South Korea
- Chamber of Mines of South Africa
- International Coal Ventures Pvt Ltd - India
- Wood Mackenzie - Singapore
- Indika Energy - Indonesia
- Georgia Ports Authority, United States
- Bahari Cakrawala Sebuku - Indonesia
- Merrill Lynch Commodities Europe
- ICICI Bank Limited - India
- McConnell Dowell - Australia
- Mercuria Energy - Indonesia
- Siam City Cement PLC, Thailand
- GN Power Mariveles Coal Plant, Philippines
- Coal and Oil Company - UAE
- Planning Commission, India
- Videocon Industries ltd - India
- Directorate Of Revenue Intelligence - India
- Maheswari Brothers Coal Limited - India
- Singapore Mercantile Exchange
- Indian Energy Exchange, India
- Gujarat Electricity Regulatory Commission - India
- Commonwealth Bank - Australia
- Marubeni Corporation - India
- Bhatia International Limited - India
- Carbofer General Trading SA - India
- Bhushan Steel Limited - India
- Sarangani Energy Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Trasteel International SA, Italy
- Kaltim Prima Coal - Indonesia
- Anglo American - United Kingdom
- Ceylon Electricity Board - Sri Lanka
- Kalimantan Lumbung Energi - Indonesia
- Banpu Public Company Limited - Thailand
- Asmin Koalindo Tuhup - Indonesia
- Global Green Power PLC Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- The Treasury - Australian Government
- SMG Consultants - Indonesia
- Renaissance Capital - South Africa
- CNBM International Corporation - China
- Price Waterhouse Coopers - Russia
- IHS Mccloskey Coal Group - USA
- Binh Thuan Hamico - Vietnam
- Cigading International Bulk Terminal - Indonesia
- CIMB Investment Bank - Malaysia
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