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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, 20 January 22
CHINESE COAL JUMPS OVER 6% ON PRE-HOLIDAY SUPPLY WORRY - REUTERS
China’s thermal coal futures soared more than 6% on Wednesday, hitting a level last seen in late November as investors grew concerned over ti ...
Thursday, 20 January 22
VIETNAM: COAL SECTOR SEES POSITIVE PROSPECT IN 2022 - VNA
With many signs of rising demand for coal in various economic sectors in 2022, the Vietnam National Coal – Mineral Industries Group (Vinacomi ...
Wednesday, 19 January 22
MARKET INSIGHT - INTERMODAL
Since the beginning of the year, we have been witnessing the BDI correcting downwards with sizable drops across all segments. Latest similar levels ...
Sunday, 09 January 22
INDONESIA MINISTER SAYS 'EMERGENCY OVER' ON COAL SUPPLY CRUNCH - REUTERS
Indonesia’s power emergency which has triggered a coal export ban is over but the government will still continue to discuss policies in this ...
Wednesday, 05 January 22
CHINA COAL FUTURES SURGE ON SUPPLY WORRIES AMID INDONESIA EXPORT BAN - REUTERS
China’s thermal coal futures surged by as much as 7.8per cent to kick off 2022 on concerns of supply disruptions after Indonesia, its biggest ...
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- TeaM Sual Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Globalindo Alam Lestari - Indonesia
- Agrawal Coal Company - India
- South Luzon Thermal Energy Corporation
- Star Paper Mills Limited - India
- Baramulti Group, Indonesia
- Alfred C Toepfer International GmbH - Germany
- Attock Cement Pakistan Limited
- Indian Oil Corporation Limited
- PTC India Limited - India
- Independent Power Producers Association of India
- Jindal Steel & Power Ltd - India
- The University of Queensland
- The State Trading Corporation of India Ltd
- Indogreen Group - Indonesia
- SN Aboitiz Power Inc, Philippines
- Electricity Generating Authority of Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Finance - Indonesia
- Kepco SPC Power Corporation, Philippines
- CNBM International Corporation - China
- Karbindo Abesyapradhi - Indoneisa
- Kaltim Prima Coal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Bangladesh Power Developement Board
- Ministry of Transport, Egypt
- Petrochimia International Co. Ltd.- Taiwan
- Billiton Holdings Pty Ltd - Australia
- Salva Resources Pvt Ltd - India
- London Commodity Brokers - England
- Maheswari Brothers Coal Limited - India
- Meenaskhi Energy Private Limited - India
- Vizag Seaport Private Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Power Finance Corporation Ltd., India
- PNOC Exploration Corporation - Philippines
- Standard Chartered Bank - UAE
- Holcim Trading Pte Ltd - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Makarim & Taira - Indonesia
- Economic Council, Georgia
- Indonesian Coal Mining Association
- Sree Jayajothi Cements Limited - India
- Iligan Light & Power Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Electricity Authority, New Zealand
- Posco Energy - South Korea
- AsiaOL BioFuels Corp., Philippines
- IEA Clean Coal Centre - UK
- Georgia Ports Authority, United States
- Bhoruka Overseas - Indonesia
- ICICI Bank Limited - India
- Bukit Baiduri Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Latin American Coal - Colombia
- Sinarmas Energy and Mining - Indonesia
- Riau Bara Harum - Indonesia
- Global Green Power PLC Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Manunggal Multi Energi - Indonesia
- Renaissance Capital - South Africa
- Siam City Cement PLC, Thailand
- Madhucon Powers Ltd - India
- Uttam Galva Steels Limited - India
- White Energy Company Limited
- Sical Logistics Limited - India
- VISA Power Limited - India
- Heidelberg Cement - Germany
- IHS Mccloskey Coal Group - USA
- Ind-Barath Power Infra Limited - India
- Coalindo Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Dalmia Cement Bharat India
- Mercuria Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Chamber of Mines of South Africa
- Deloitte Consulting - India
- Gujarat Electricity Regulatory Commission - India
- Bukit Makmur.PT - Indonesia
- Indika Energy - Indonesia
- Petron Corporation, Philippines
- Indian Energy Exchange, India
- Global Business Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Metalloyd Limited - United Kingdom
- Medco Energi Mining Internasional
- Oldendorff Carriers - Singapore
- Intertek Mineral Services - Indonesia
- Binh Thuan Hamico - Vietnam
- Grasim Industreis Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Mintek Dendrill Indonesia
- Thiess Contractors Indonesia
- Lanco Infratech Ltd - India
- Mjunction Services Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Barasentosa Lestari - Indonesia
- Central Java Power - Indonesia
- Borneo Indobara - Indonesia
- Orica Australia Pty. Ltd.
- Kohat Cement Company Ltd. - Pakistan
- Jaiprakash Power Ventures ltd
- Ministry of Mines - Canada
- Coal and Oil Company - UAE
- Bahari Cakrawala Sebuku - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Essar Steel Hazira Ltd - India
- Cement Manufacturers Association - India
- Port Waratah Coal Services - Australia
- GVK Power & Infra Limited - India
- Thai Mozambique Logistica
- Ambuja Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sarangani Energy Corporation, Philippines
- Parliament of New Zealand
- Jorong Barutama Greston.PT - Indonesia
- Rio Tinto Coal - Australia
- Vedanta Resources Plc - India
- Sakthi Sugars Limited - India
- Directorate General of MIneral and Coal - Indonesia
- GMR Energy Limited - India
- Merrill Lynch Commodities Europe
- LBH Netherlands Bv - Netherlands
- Australian Commodity Traders Exchange
- Samtan Co., Ltd - South Korea
- Indo Tambangraya Megah - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Kumho Petrochemical, South Korea
- Bhushan Steel Limited - India
- Africa Commodities Group - South Africa
- Chettinad Cement Corporation Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- International Coal Ventures Pvt Ltd - India
- Gujarat Sidhee Cement - India
- European Bulk Services B.V. - Netherlands
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Malabar Cements Ltd - India
- Energy Link Ltd, New Zealand
- Aditya Birla Group - India
- Kideco Jaya Agung - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sojitz Corporation - Japan
- Kapuas Tunggal Persada - Indonesia
- India Bulls Power Limited - India
- New Zealand Coal & Carbon
- Miang Besar Coal Terminal - Indonesia
- Xindia Steels Limited - India
- SMG Consultants - Indonesia
- Eastern Coal Council - USA
- Romanian Commodities Exchange
- Kalimantan Lumbung Energi - Indonesia
- Meralco Power Generation, Philippines
- Energy Development Corp, Philippines
- Mercator Lines Limited - India
- ASAPP Information Group - India
- Straits Asia Resources Limited - Singapore
- Planning Commission, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wilmar Investment Holdings
- Leighton Contractors Pty Ltd - Australia
- Australian Coal Association
- Semirara Mining and Power Corporation, Philippines
- Edison Trading Spa - Italy
- Bharathi Cement Corporation - India
- Altura Mining Limited, Indonesia
- Commonwealth Bank - Australia
- Videocon Industries ltd - India
- Banpu Public Company Limited - Thailand
- Anglo American - United Kingdom
- Bukit Asam (Persero) Tbk - Indonesia
- MS Steel International - UAE
- PowerSource Philippines DevCo
- Directorate Of Revenue Intelligence - India
- Formosa Plastics Group - Taiwan
- Karaikal Port Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Tamil Nadu electricity Board
- SMC Global Power, Philippines
- McConnell Dowell - Australia
- Tata Chemicals Ltd - India
- Kobexindo Tractors - Indoneisa
- Siam City Cement - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Trasteel International SA, Italy
- Carbofer General Trading SA - India
- Pendopo Energi Batubara - Indonesia
- Orica Mining Services - Indonesia
- Interocean Group of Companies - India
- San Jose City I Power Corp, Philippines
- Minerals Council of Australia
- Semirara Mining Corp, Philippines
- Simpson Spence & Young - Indonesia
- Bhatia International Limited - India
- Central Electricity Authority - India
- The Treasury - Australian Government
- Price Waterhouse Coopers - Russia
- Timah Investasi Mineral - Indoneisa
- Toyota Tsusho Corporation, Japan
- Coastal Gujarat Power Limited - India
- Bulk Trading Sa - Switzerland
- Marubeni Corporation - India
- Bayan Resources Tbk. - Indonesia
- Singapore Mercantile Exchange
- Asmin Koalindo Tuhup - Indonesia
- Parry Sugars Refinery, India
- Eastern Energy - Thailand
- Antam Resourcindo - Indonesia
- Savvy Resources Ltd - HongKong
- Asia Pacific Energy Resources Ventures Inc, Philippines
- CIMB Investment Bank - Malaysia
- PetroVietnam Power Coal Import and Supply Company
- Wood Mackenzie - Singapore
- Larsen & Toubro Limited - India
- Sindya Power Generating Company Private Ltd
- Goldman Sachs - Singapore
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