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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, 23 December 21
INDONESIA’S 2022 COAL OUTPUT SEEN BETWEEN 637 MLN-664 MLN T- OFFICIAL - REUTERS
Indonesia’s 2022 coal output is estimated at between 637 million to 664 million tonnes based on production plans currently being finalised, s ...
Thursday, 23 December 21
VALE ANNOUNCES THE SALE OF ITS COAL ASSETS
Vale informs that, on this date, it has entered into a binding agreement with Vulcan to sell the Moatize coal mine and the Nacala Logistics Corrido ...
Thursday, 23 December 21
INDIA: CAPTIVE POWER PRODUCERS URGE GOVT TO ENSURE NORMAL COAL SUPPLIES - PTI
A captive power producers’ association has urged the government for 100 per cent normalisation of coal supply to captive power producers whil ...
Thursday, 23 December 21
MARKET INSIGHT - INTERMODAL
As an outstanding year for the dry bulk freight market comes to a close, so does a thriving year for the SnP market which can only be compared to 2 ...
Tuesday, 14 December 21
COAL LOCK-IN IN SOUTHEAST ASIA PRESENTS A CHALLENGE FOR THE ASIAN DEVELOPMENT BANK'S COAL RETIREMENT PLAN - IEEFA
In August, the Asian Development Bank (ADB) announced an ambitious plan to buy high emissions coal-fired power plants in Southeast Asia and retire ...
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- TeaM Sual Corporation - Philippines
- Indian Energy Exchange, India
- Orica Australia Pty. Ltd.
- Coastal Gujarat Power Limited - India
- Cement Manufacturers Association - India
- OPG Power Generation Pvt Ltd - India
- Orica Mining Services - Indonesia
- Siam City Cement PLC, Thailand
- Aditya Birla Group - India
- Bulk Trading Sa - Switzerland
- Indian Oil Corporation Limited
- Bukit Makmur.PT - Indonesia
- CNBM International Corporation - China
- Ind-Barath Power Infra Limited - India
- MS Steel International - UAE
- Energy Development Corp, Philippines
- Interocean Group of Companies - India
- Manunggal Multi Energi - Indonesia
- GAC Shipping (India) Pvt Ltd
- Kartika Selabumi Mining - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Siam City Cement - Thailand
- Borneo Indobara - Indonesia
- Planning Commission, India
- Sical Logistics Limited - India
- Maheswari Brothers Coal Limited - India
- PTC India Limited - India
- Africa Commodities Group - South Africa
- Samtan Co., Ltd - South Korea
- Therma Luzon, Inc, Philippines
- Posco Energy - South Korea
- Holcim Trading Pte Ltd - Singapore
- Uttam Galva Steels Limited - India
- Savvy Resources Ltd - HongKong
- Bhushan Steel Limited - India
- San Jose City I Power Corp, Philippines
- Banpu Public Company Limited - Thailand
- Power Finance Corporation Ltd., India
- Straits Asia Resources Limited - Singapore
- Central Electricity Authority - India
- Miang Besar Coal Terminal - Indonesia
- Merrill Lynch Commodities Europe
- CIMB Investment Bank - Malaysia
- GVK Power & Infra Limited - India
- South Luzon Thermal Energy Corporation
- Kumho Petrochemical, South Korea
- Ministry of Mines - Canada
- Electricity Authority, New Zealand
- Bukit Baiduri Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Maharashtra Electricity Regulatory Commission - India
- SMG Consultants - Indonesia
- The Treasury - Australian Government
- London Commodity Brokers - England
- Heidelberg Cement - Germany
- Sindya Power Generating Company Private Ltd
- Lanco Infratech Ltd - India
- Vizag Seaport Private Limited - India
- Barasentosa Lestari - Indonesia
- Timah Investasi Mineral - Indoneisa
- Eastern Coal Council - USA
- Karbindo Abesyapradhi - Indoneisa
- Mercator Lines Limited - India
- Directorate General of MIneral and Coal - Indonesia
- White Energy Company Limited
- Meenaskhi Energy Private Limited - India
- Larsen & Toubro Limited - India
- Ambuja Cements Ltd - India
- Bangladesh Power Developement Board
- Simpson Spence & Young - Indonesia
- Parry Sugars Refinery, India
- Neyveli Lignite Corporation Ltd, - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Chettinad Cement Corporation Ltd - India
- Petron Corporation, Philippines
- Semirara Mining Corp, Philippines
- Sojitz Corporation - Japan
- Eastern Energy - Thailand
- Economic Council, Georgia
- Anglo American - United Kingdom
- Salva Resources Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Global Business Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Krishnapatnam Port Company Ltd. - India
- Attock Cement Pakistan Limited
- Vijayanagar Sugar Pvt Ltd - India
- Bhatia International Limited - India
- The University of Queensland
- Minerals Council of Australia
- Deloitte Consulting - India
- Carbofer General Trading SA - India
- Trasteel International SA, Italy
- Kideco Jaya Agung - Indonesia
- Romanian Commodities Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Wilmar Investment Holdings
- IEA Clean Coal Centre - UK
- Ministry of Transport, Egypt
- Mintek Dendrill Indonesia
- Thai Mozambique Logistica
- Riau Bara Harum - Indonesia
- SMC Global Power, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Meralco Power Generation, Philippines
- Wood Mackenzie - Singapore
- Sree Jayajothi Cements Limited - India
- Billiton Holdings Pty Ltd - Australia
- New Zealand Coal & Carbon
- Bhoruka Overseas - Indonesia
- Parliament of New Zealand
- Baramulti Group, Indonesia
- India Bulls Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Madhucon Powers Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Sakthi Sugars Limited - India
- ICICI Bank Limited - India
- Videocon Industries ltd - India
- Directorate Of Revenue Intelligence - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Agrawal Coal Company - India
- Australian Commodity Traders Exchange
- Intertek Mineral Services - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kapuas Tunggal Persada - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Goldman Sachs - Singapore
- Ceylon Electricity Board - Sri Lanka
- PetroVietnam Power Coal Import and Supply Company
- Kobexindo Tractors - Indoneisa
- Metalloyd Limited - United Kingdom
- Pendopo Energi Batubara - Indonesia
- Coalindo Energy - Indonesia
- Coal and Oil Company - UAE
- Mjunction Services Limited - India
- Toyota Tsusho Corporation, Japan
- Australian Coal Association
- Vedanta Resources Plc - India
- Kohat Cement Company Ltd. - Pakistan
- Mercuria Energy - Indonesia
- Medco Energi Mining Internasional
- Rio Tinto Coal - Australia
- Indika Energy - Indonesia
- Energy Link Ltd, New Zealand
- Global Coal Blending Company Limited - Australia
- PNOC Exploration Corporation - Philippines
- Gujarat Sidhee Cement - India
- Marubeni Corporation - India
- Jindal Steel & Power Ltd - India
- Price Waterhouse Coopers - Russia
- Sinarmas Energy and Mining - Indonesia
- Antam Resourcindo - Indonesia
- Kaltim Prima Coal - Indonesia
- Indonesian Coal Mining Association
- PowerSource Philippines DevCo
- Aboitiz Power Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Dalmia Cement Bharat India
- Kepco SPC Power Corporation, Philippines
- Port Waratah Coal Services - Australia
- Xindia Steels Limited - India
- Ministry of Finance - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- VISA Power Limited - India
- Georgia Ports Authority, United States
- Iligan Light & Power Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Tata Chemicals Ltd - India
- Jaiprakash Power Ventures ltd
- Independent Power Producers Association of India
- Karaikal Port Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Singapore Mercantile Exchange
- European Bulk Services B.V. - Netherlands
- Tamil Nadu electricity Board
- McConnell Dowell - Australia
- Sarangani Energy Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Star Paper Mills Limited - India
- Bharathi Cement Corporation - India
- Thiess Contractors Indonesia
- Semirara Mining and Power Corporation, Philippines
- Indogreen Group - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Chamber of Mines of South Africa
- SN Aboitiz Power Inc, Philippines
- Makarim & Taira - Indonesia
- Essar Steel Hazira Ltd - India
- Electricity Generating Authority of Thailand
- GMR Energy Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Renaissance Capital - South Africa
- Commonwealth Bank - Australia
- Indo Tambangraya Megah - Indonesia
- Gujarat Electricity Regulatory Commission - India
- TNB Fuel Sdn Bhd - Malaysia
- Latin American Coal - Colombia
- Global Green Power PLC Corporation, Philippines
- ASAPP Information Group - India
- Grasim Industreis Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Edison Trading Spa - Italy
- Globalindo Alam Lestari - Indonesia
- Central Java Power - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Binh Thuan Hamico - Vietnam
- Malabar Cements Ltd - India
- The State Trading Corporation of India Ltd
- AsiaOL BioFuels Corp., Philippines
- Standard Chartered Bank - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- Alfred C Toepfer International GmbH - Germany
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