Driven by spot rates or geopolitics?

Broader view

The impact of low spot rates seems to be drowned out by the new US administration, which continues to move towards a goal that only it knows. What is new is US companies’ proclamation of interest in resuming the Nord Stream 2 pipeline. How this goes together with support for US LNG is all too unclear to the writer of these lines.

The turn of the months brought more quarterly results from LNG shipping companies, specifically Awilco LNG and Cool Company. We can see in them the impact of persistently low spot rates and hope for the future.

However, this was compounded by a further rise in US distrust, which sent US and US-listed companies down. This geopolitical break in perceptions of the US is now more significant than low spot rates. See the chart of the UPI and the S&P 500. But here, too, in addition to the general sentiment, individual opportunities must be watched. It probably won’t surprise anyone that the volume traded was above average.

On the other hand, the UPI is rising, mainly due to its global focus. Over the past two weeks, the index has returned to the 169-point mark in a nice trend. According to technical analysis, two companies from the US stock exchanges can support the attempt to break upwards.

Constituents

While the UPI is rising, cautious sideways movements prevail. On the other hand, double-digit moves, especially those to the downside, are drawing attention. So let’s start with them.

We’re going to talk about three companies: Awilco LNG (OSE: ALNG), Cool Company (NYQ/OSE: CLCO) and Golar LNG (NYQ: GLNG). While the first two are still victims of low rates, Golar has seen a drop for no apparent reason. The 14.7% drop came after a brief rise on Monday, with Q4-24 results released on Thursday. We have no clue yet about the reasons for the decline. GLNG is looking to move FLNG Hilli to South America this quarter, as well as negotiate a financing arrangement for FLNG Hilli and FLNG Gimi this quarter, while finalising negotiations for the Argentine contract for FLNG Hilli.

ALNG was down 15.1%, the most significant drop of the past week. After the previous week-correction, the bottom appeared to have been reached, but the recent breakout sent the stock even lower. The reluctance to lock in long-term contracts, as discussed by Richard Tyrrell, CEO of CLCO, may be to blame: “Charters are still sitting on their hands, they don’t feel they need to lock that in quite yet.” His and other statements from competing companies indicated that improvements could not be expected until later this year under current conditions. Still, the plot is on – old steam-powered ships are being phased out as contracts expire. As Lucy Hine of TradeWinds wrote: “Another LNG steamship hits the market. Anyone starting to lose count?” after H-Line Shipping put up for sale its second ship with this propulsion.

So, investors are currently not compelled to invest in companies with fleets without long-term contracts. These companies are cutting dividends, often one of the main reasons to buy them. On the other hand, prices may soon reach absurdly low levels, but the US administration and the chaos it has caused in international confidence are strong arguments for staying away.

Korea Line Corporation (KRX: 005880) has seen the most significant gains, with its stock up 6.6%. It’s trying to pull away from the support it returned to late last year. Tsakos Energy Navigation (NYQ: TSE) has a similar chart pattern, rising 4.2%.

Capital Clean Energy Corporation (NYQ: CCEC) rose 5.6%, breaking out of last November’s range. The next step will be to break the twenty-dollar mark and close above it.

The main credit for the UPI’s rise goes to Qatar’s Nakilat (QSE: QGTS), which rose 3.8% to get above the line it attacked in vain last summer. Once again, the sector itself is proving to be promising, and if it hadn’t been for the obstacles above, at least the geopolitical ones, things would have gone more easily.

Japanese companies are sticking with long-term resistors, the question is whether they will attempt a breakout. Their moves have been around 0.5% to 1.2%.

Before we move on to the remaining declining companies, let’s revisit two companies with upside potential according to technical analysis. New Fortress Energy (NYQ: NFE) and FLNG (NYQ/OSE: FLNG). Both have formed a “hammer” formation on the candlestick chart. NFE is down 1.3%, while FLNG is down 0.7%.

Malaysia’s MISC (KLSE: 3816) returned to support after falling 3.3%. BP (NYQ: BP) erased its acquisition gains but remained above its prior range despite a 3.2% decline. Another UPI representative in a similar position here is Dynagas LNG Partners (NYQ: DLNG), which also ended its growth adventure by returning to its starting price—but so far, it hasn’t entered back into the lower sideband.

Crystal Ball

The short-term outlook remains cautiously optimistic, though we expect increased volatility in the coming weeks. LNG spot rates stayed low, but the impact remains marginal for most UPI constituents. The market is watching for potential breakouts at key resistance levels, which could determine the next price direction.

Our outlook remains positive long-term. Demand for LNG is expected to grow, supported by situational or management-driven actions and the potential for new long-term contracts. Investors should monitor policy developments, market competition, and upcoming corporate earnings for further direction.

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