Stocks and market trends
LNG prices move higher in Asia as stock up before winter starts. It looks like the hot summer has impacted LNG storage facilities and thus an interesting time is coming for shipping and share holders of the best companies.
Asian prices rise for 3rd week, boosted by North Asian demand
Winter is coming early as rates are starting to rise.
FLEX LNG short covering today gives a hint of the share price movement up as aprox 1 million shares need to be bought back in time.
LNG shipping is soon entering seasonal rate hike, China is continuing increased import, and lastly China and USA is in negotiations over tariffs.
While all this will be unveiled in the near future, let’s take a look at yesterday’s LNG shipping news from Flex LNG, the Q2 results are showing progress towards positive results. Taking into account weak hiring period from one vessel, Flex LNG is on the way to making good money, probably positive EBITDA from Q3 or Q4.
As per guiding from company management FLEX anticipates strong rates ahead and market conditions should be favorable, perfect timing as we will enter winter storage deliveries, and of course 2019 is poised to be an even stronger year for LNG shippers.
Looking at China and imports, the July numbers show increase in imports, US – China tariffs should not affect shippers at all, on the contrary it might be an advantage as LNG loads will perhaps be unloaded and loaded in transit ports to avoid China tariffs. This means even fewer ship/sailing days available in the total market. Good, right? Yes, actually it can lead to extraordinarily high rates, however tariffs might get cancelled and business will be as “usual”, though usual is not the correct term as rates will increase on increased demand and not enough vessels available.
Every day there is LNG news, in particular IMO related as the world is turning to LNG, this means a massive market is on the way, port facilities are adjusting to the new reality as is the shipping industry as a whole. But, that’s not all, also on land LNG is increasingly being utilized as a cleaner fuel to produce electricity.
The experts are not in agreement if a oversupply will come in a few years, I think there will be a dip after 2020 before LNG again makes a big leap and there will be vessel shortage and rates go even higher. But, first 2019 will come and prove to be strong!
Make your bets while the market is emerging and pricing is at NAV value. For sure pricing will get higher soon and even dividends will be paid to shareholders.
The effects of Chinese tariffs on LNG is most likely going to affect US gas producers, mid stream and LNG producers, but should not be a LNG shipping market challenge.
This is why shipping of LNG is the safer bet, it is a mobile market and the companies can direct their business to other regions.
Now, China needs LNG and will most likely get it from other producers than US ones. This leaves opportunities for shipping to still do business with China, but also to follow Trump’s recent plan to supply Europe from US terminals.
Major oil and gas companies are likely to make investments in other countries for their LNG producing activities as well as in mainland USA. Africa, Canada and Australia/east Asia are for sure coming in the years ahead given these new political changes. This still leaves LNG shipping as the winner for years to come and gas producers will probably struggle somewhat.
LNG is the preferred fuel for shipping and also well suited for export for land based power plants, small and big. This will ramp up quickly and there will be rate hikes in the time to come, how high is difficult to predict but we could see new records within a year.
Gaslog and Flex LNG will be winners in this market, China tariffs will have little effect on this other than frightened investors that can’t see the big picture.
New development in LNG is emerging from China, whilst US export might be at a loss from tariff it is open business for LNG in general.
These China policies on LNG favors my pick, LNG shippers vs US LNG exporters.
The most safe bet is the ones who can chose where to load and unload, not necessarily the producers as they are not at risk to loose one market due to US policy.
And from Gaslog, although reporting a loss, guiding is firm ahead into 2019.
We should see major positioning with top pick LNG shippers onwards. It should come as no surprise that spot rates and TC rates will be strong. Expect a peak somewhere between 2020-2022 followed by a dip and later on a even stronger demand, it suits well for the shorter term, medium term and long term investors. This is after all a super cycle and it is going to be even bigger than most imagine. Look out for dividend policy, it is bound to come and be raised in the next years.
Tons of money for the smart investor!
China issues draft rules to open access to gas infrastructure
New agreement between EU and USA (Juncker and Trump) on LNG will lead to more LNG cargoes and thus better market condition for LNG shipping.
The agreement not only stipulates more import of LNG but also building of more LNG cargo import terminals in EU.
US Tariff on LNG is still off the table and makes for healthy market conditions for LNG shippers and exporters.
The world wide policy on LNG as the energy future is set and emerging as the leader for the next decades, investors should have good opportunities ahead. Best bets are still major exporters and shippers.
Set to become the world’s primary energy source in the the next decades gas and LNG has a bright future.
An ever increasing number of new vessels are being built to have LNG driven propulsion, this includes very large passenger cruise ships, this will increase demand on a large scale in the years to come making LNG producers and LNG shippers a good bet!
Fresh in-depth analysis from Fairplay, no doubt, LNG is the winner for decades to come, coal is being replaced in an ever faster pace as the chosen energy, China and South Korea has made up their mind to become more environmental.For LNG shippers there should be golden times ahead as volumes consumed surges. Spot rates already hitting beyond $90k might just be the start, and TC contract values would certainly a good business as well.Fairplay LNG
FLNG short time indicator MACD shows the stock is on another upturn, following the trend channel.Target for this leg up is 14,50 kr, leaving the shorts in a difficult position at 13 kr where they sold much more than the have bought lower. There simply is not enough shares for them to buy, longs know the market and stand firmly their ground. This scenario should lead to a fast rally soon.FLNG will take delivery of another vessel late this month, probably stock exchange release will be coupled with a vessel sell lease back notification.
Set to start sometime in the future is LNG spot rates index from Baltic exchange. This will be positive for evaluation of LNG shipping companies on a shorter time frame. It should give better incentives for traders in the LNG shipping stock market and most probably trading volume will surge.Today’s Awilco LNG TC rates is a good indication of sustainable rates somewhere in the $80k range.LNG spot rates
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