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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, 26 January 22
MARKET INSIGHT - INTERMODAL
While it is logical that most of the S&P reports of the first weeks of the year are linked to very limited activity as reflected in the weekly ...
Wednesday, 26 January 22
INDONESIA: DME PROJECT IS ECONOMICALLY VIABLE AS STUDY DEMONSTRATES
The government is encouraging downstream coal processing or increase in coal added value, for example by turning coal into Dimethyl Ether (DME) to ...
Wednesday, 26 January 22
COMMODITY PRICES COULD SOAR IF THE RUSSIA-UKRAINE CRISIS ESCALATES - ING
It appears that a number of commodity markets are starting to at least price in some geopolitical risk around the growing tension between Russia an ...
Wednesday, 26 January 22
INDONESIA'S COAL BAN SENDS PRICES SOARING, OTHER EXPORTERS FAIL TO STEP UP - REUTERS
Indonesia’s short-lived ban on exporting coal has sent ructions through the seaborne market for the fuel in Asia, with the fallout likely to ...
Friday, 21 January 22
CHINA'S POWER TRADING TARIFFS TO RISE IN 2022 - FITCH RATINGS
Rising trading volume and higher-than-benchmark tariffs in the 2022 bilateral contracts signed between Chinese power generation companies (gencos) ...
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- Kalimantan Lumbung Energi - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Singapore Mercantile Exchange
- Mjunction Services Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The University of Queensland
- Attock Cement Pakistan Limited
- Australian Coal Association
- Global Coal Blending Company Limited - Australia
- Posco Energy - South Korea
- Semirara Mining Corp, Philippines
- Central Electricity Authority - India
- Oldendorff Carriers - Singapore
- Ministry of Mines - Canada
- Price Waterhouse Coopers - Russia
- Rashtriya Ispat Nigam Limited - India
- New Zealand Coal & Carbon
- Samtan Co., Ltd - South Korea
- ICICI Bank Limited - India
- Latin American Coal - Colombia
- Indian Oil Corporation Limited
- GN Power Mariveles Coal Plant, Philippines
- Formosa Plastics Group - Taiwan
- Siam City Cement PLC, Thailand
- Africa Commodities Group - South Africa
- PNOC Exploration Corporation - Philippines
- Savvy Resources Ltd - HongKong
- The State Trading Corporation of India Ltd
- VISA Power Limited - India
- Indika Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Jindal Steel & Power Ltd - India
- Global Business Power Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Coalindo Energy - Indonesia
- Trasteel International SA, Italy
- GMR Energy Limited - India
- Tamil Nadu electricity Board
- Banpu Public Company Limited - Thailand
- Holcim Trading Pte Ltd - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Coal and Oil Company - UAE
- Petron Corporation, Philippines
- Indogreen Group - Indonesia
- Australian Commodity Traders Exchange
- Chamber of Mines of South Africa
- Kepco SPC Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- McConnell Dowell - Australia
- Energy Link Ltd, New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Indo Tambangraya Megah - Indonesia
- CIMB Investment Bank - Malaysia
- Sojitz Corporation - Japan
- Essar Steel Hazira Ltd - India
- Toyota Tsusho Corporation, Japan
- ASAPP Information Group - India
- Interocean Group of Companies - India
- Riau Bara Harum - Indonesia
- CNBM International Corporation - China
- South Luzon Thermal Energy Corporation
- Electricity Generating Authority of Thailand
- San Jose City I Power Corp, Philippines
- Aboitiz Power Corporation - Philippines
- Economic Council, Georgia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Antam Resourcindo - Indonesia
- Heidelberg Cement - Germany
- Port Waratah Coal Services - Australia
- Kobexindo Tractors - Indoneisa
- Bulk Trading Sa - Switzerland
- TNB Fuel Sdn Bhd - Malaysia
- Indonesian Coal Mining Association
- Krishnapatnam Port Company Ltd. - India
- Madhucon Powers Ltd - India
- Binh Thuan Hamico - Vietnam
- Videocon Industries ltd - India
- Borneo Indobara - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- The Treasury - Australian Government
- Orica Australia Pty. Ltd.
- Bhoruka Overseas - Indonesia
- Maheswari Brothers Coal Limited - India
- Aditya Birla Group - India
- Makarim & Taira - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Eastern Energy - Thailand
- Anglo American - United Kingdom
- Central Java Power - Indonesia
- Directorate Of Revenue Intelligence - India
- Bayan Resources Tbk. - Indonesia
- TeaM Sual Corporation - Philippines
- Mercuria Energy - Indonesia
- Thai Mozambique Logistica
- Kumho Petrochemical, South Korea
- Timah Investasi Mineral - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PowerSource Philippines DevCo
- Metalloyd Limited - United Kingdom
- Coastal Gujarat Power Limited - India
- Intertek Mineral Services - Indonesia
- IEA Clean Coal Centre - UK
- Georgia Ports Authority, United States
- MS Steel International - UAE
- Ind-Barath Power Infra Limited - India
- Straits Asia Resources Limited - Singapore
- Edison Trading Spa - Italy
- GVK Power & Infra Limited - India
- Commonwealth Bank - Australia
- Sakthi Sugars Limited - India
- Standard Chartered Bank - UAE
- Rio Tinto Coal - Australia
- Sarangani Energy Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- Electricity Authority, New Zealand
- Eastern Coal Council - USA
- Billiton Holdings Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Larsen & Toubro Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Ambuja Cements Ltd - India
- Energy Development Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Vedanta Resources Plc - India
- Meenaskhi Energy Private Limited - India
- Salva Resources Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Kaltim Prima Coal - Indonesia
- Kideco Jaya Agung - Indonesia
- Manunggal Multi Energi - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Minerals Council of Australia
- International Coal Ventures Pvt Ltd - India
- Lanco Infratech Ltd - India
- PTC India Limited - India
- Thiess Contractors Indonesia
- Star Paper Mills Limited - India
- India Bulls Power Limited - India
- Agrawal Coal Company - India
- London Commodity Brokers - England
- Mintek Dendrill Indonesia
- Kapuas Tunggal Persada - Indonesia
- Sical Logistics Limited - India
- Chettinad Cement Corporation Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Cigading International Bulk Terminal - Indonesia
- SMC Global Power, Philippines
- Sree Jayajothi Cements Limited - India
- Kartika Selabumi Mining - Indonesia
- Cement Manufacturers Association - India
- Baramulti Group, Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bhatia International Limited - India
- Deloitte Consulting - India
- Wilmar Investment Holdings
- Pendopo Energi Batubara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Jaiprakash Power Ventures ltd
- PetroVietnam Power Coal Import and Supply Company
- Asmin Koalindo Tuhup - Indonesia
- Merrill Lynch Commodities Europe
- Alfred C Toepfer International GmbH - Germany
- Carbofer General Trading SA - India
- Parry Sugars Refinery, India
- Xindia Steels Limited - India
- Power Finance Corporation Ltd., India
- Meralco Power Generation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Globalindo Alam Lestari - Indonesia
- Uttam Galva Steels Limited - India
- Orica Mining Services - Indonesia
- Goldman Sachs - Singapore
- Vizag Seaport Private Limited - India
- LBH Netherlands Bv - Netherlands
- Parliament of New Zealand
- Mercator Lines Limited - India
- Marubeni Corporation - India
- Malabar Cements Ltd - India
- Altura Mining Limited, Indonesia
- Wood Mackenzie - Singapore
- Grasim Industreis Ltd - India
- SN Aboitiz Power Inc, Philippines
- Romanian Commodities Exchange
- Medco Energi Mining Internasional
- Ceylon Electricity Board - Sri Lanka
- Gujarat Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- Bukit Makmur.PT - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- IHS Mccloskey Coal Group - USA
- GAC Shipping (India) Pvt Ltd
- Bhushan Steel Limited - India
- White Energy Company Limited
- Indian Energy Exchange, India
- OPG Power Generation Pvt Ltd - India
- Ministry of Finance - Indonesia
- Bharathi Cement Corporation - India
- SMG Consultants - Indonesia
- Independent Power Producers Association of India
- Iligan Light & Power Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Bukit Baiduri Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- Bangladesh Power Developement Board
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement - Thailand
- Renaissance Capital - South Africa
- Barasentosa Lestari - Indonesia
- Planning Commission, India
- Tata Chemicals Ltd - India
- Dalmia Cement Bharat India
- Global Green Power PLC Corporation, Philippines
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