Summary
The UP World LNG Shipping Index (UPI), tracking listed LNG shipping companies, declined 0.56% last week, closing at 162.48 points, while the S&P 500 gained 0.96%. Despite this overall dip, the sector showed varied performance among individual stocks. Exmar NV surged 34.7% due to renewed privatisation interest, while New Fortress Energy rose 16.3% on reduced debt concerns. Conversely, Cool Company and Flex LNG suffered double-digit losses, reflecting broader challenges.
Geopolitical turbulence, including South Korea’s brief martial law and Chinese manoeuvres near Taiwan, failed to sway global markets significantly. The sector faces a first “mature crisis,” with investor caution likely persisting until spring. However, strategic management actions, such as debt restructuring and adapting to market trends like the phase-out of steam-powered tankers, will be pivotal in navigating these headwinds. Despite these challenges, the critical role of LNG shipping in global energy supply continues to grow.
UPI & SPX
Last week, the UP World LNG Shipping Index (UPI), which tracks listed LNG shipping companies, lost 0.91 points, equivalent to 0.56%, closing at 162.48 points. The S&P 500 index gained 0.96%. The chart below illustrates the performance of both indices with weekly data.
Broader view
Last week was rich in geopolitical events. The six-hour martial law in South Korea, the collapse of the Assad regime in Syria, the fall of the government in France and the new Chinese manoeuvres in Taiwan have shown that the stability of our world is very fragile. But stock markets are spectacularly ignoring these events, with bitcoin breaking the much-vaunted $100,000 mark.
In our regular Chart of the Week, we lamented that the main problem with our sector of interest is the diversion of investors who see attractive opportunities elsewhere and leave the sector’s stocks aside until the next dividend. We conditioned this scepticism on crossing the long-term moving average with the UPI. After updating the data, the UPI and MA40 (forty-week moving average) are the same. At the same time, the traded volume of the stock is still low. So, what was the week’s performance for single-stock companies?
Constituents
The events could be briefly summarised as follows: It could have been worse. UPI’s relatively tiny loss is due not only to a few rising titles but mainly to several undecideds.
Cool Company (NYSE/OSE: CLCO) was the biggest loser, continuing its downtrend. It lost 10.4% last week. Second is another Norwegian company, Flex LNG (NYSE/OSE: FLNG), which lost 9.2% and broke its long-term support at $25.
The third Norwegian company, Awilco LNG (OSE: ALNG), is down 6.7%. While both CLCO and ALNG cut the dividend, FLNG did not.
Korea Line Corporation (KRX: 005880) lost 6.2%, similar to ALNG. However, its decline came after the resolution of the domestic political crisis.
Dynagas LNG Partners (NYSE: DLNG) fell 4.1%, though this partnership is at its highest level since 2019. However, due to sector developments, the last three weeks have also failed to break higher.
A trio of gas and oil producers also fell. Chevron (NYSE: CVX) lost the most, writing off 4.1%. Shell (NYSE: SHEL) lost 2.3%, and BP (NYSE: BP) lost 2.1%. The irony here is that the minor losses from last week are the biggest threats to the stock. SHEL and BP are in a downtrend, respectively, and BP appears to be starting a new downtrend phase.
The companies hovering around zero are indecisive to positive. Undecided stocks include Capital Clean Energy Carriers (NYSE: CCEC) and Tsakos Energy Navigation (NYSE: TEN), while Nakilat (QSE: QGTS) has staved off efforts for a larger decline.
The clear winner is Exmar NV (BSE: EXM), up 34.7%. This is due to the majority owner’s renewed interest in privatising the company.
New Fortress Energy (NASDAQ: NFE) is rising thanks to positive developments. Investors have lost their concerns about the company’s debt, which it wants to reduce through the participation of other partners. Last week, the stock rose 16.3%.
Golar LNG (NASDAQ: GLNG) continues to rise after a break; this time, the weekly gain was 7.8%.
Excelerate Energy (NASDAQ: EE), another of the previous movers, on the other hand, is taking a break, rising just 1.1%, with intraday moves both to the plus and minus side.
We’ll also mention Malaysia’s MISC (KLSE: 3816), which added 2.6% after returning to the previous supports we wrote about earlier.
Crystal Ball
What is our outlook for the immediate future? We anticipate a continued decline in the UPI through the remainder of the year, primarily driven by investor behaviour. Many seem likely to patiently await further drops in LNG shipping sector stocks before re-entering the market, likely no earlier than spring. This caution is unsurprising, given the multitude of external factors at play.
One notable trend on the horizon is the accelerated phasing out of steam-powered tankers—an inevitable development given the current lower spot rates. However, as highlighted in today’s commentary, a broader decline in the UPI does not necessarily spell losses for all companies. Management’s actions, particularly in debt refinancing already underway at several firms, will be critical in determining individual outcomes.
It is fair to say that the sector is facing its first mature crisis—excluding the covenant decline—and this is the moment for management to prove the value they bring to shareholders.
About UPI
Established in 2020, the UP World LNG Shipping Index is a rules-based stock index family designed to measure the performance of worldwide publicly traded companies involved in the maritime transport of liquefied natural gas (LNG). This unique index covers 19 companies and partnerships worldwide, representing over 65% of the world’s LNG carrier fleet in 2020. The UP Index offers premium services with freemium and trial access to charts. With Freemium, users can access the basic UPI vs S&P 500 chart after email registration. The trial includes full access for fourteen days.
Source: UP-Indices.com via LNGshippingStocks.com