Summary
The LNG shipping sector presented a mix of gains and challenges during the past week, shaped by fluctuating spot rates and evolving market dynamics. During the first earning calls, spot rates and dividends were the main themes. Meanwhile, the global fleet started gradually rejuvenating, with older vessels being phased out in favour of more efficient ships.
UPI & SPX
Last week, UPI, which tracks listed LNG shipping companies, gained 0.86 points, equivalent to 0.53%, closing at 164.83 points. The S&P 500 index lost 2.08%. The chart below illustrates the performance of both indices with weekly data.
Broader view
Companies’ published results for Q3-24 influenced last week’s development. As we announced, sufficient space was devoted to developing (mainly spot) rates. In this section, we will draw from conference calls.
Oystein Kalleklev, CEO of FLEX LNG, stated the rates: “The spot market is liquid, but rates are poor, and we expect the market to stay poor for the remainder of the year.” According to him, the low rates are caused by the excess of available ships: “You might have floating storage if gas prices are in contango, meaning that they are higher later in the year than spot, which can typically drive up to 30, 40 ships in floating storage. This year, we have high gas prices, but they are not in contango. So it means you are disincentivised to do floating of the cargoes. So number of available ships have been built up, also with the scheduled deliveries of ships.”
The fear that low spot rates will affect dividend payments is also being fulfilled. This inconvenience befell Awilco LNG (OSE: ALNG), which cancelled its Q3 dividend due to low rates. Its TCE fell from $122,900 in Q2 to $58,000 in Q3.
Low rates will rejuvenate the world’s fleet, with newly delivered ships displacing inefficient old ones. After the long-term contract expires, steam-powered ships are no longer worth operating. Lucy Hine from TradeWinds wrote in her article, “South Korean owner SK Shipping has sold four LNG carriers for demolition in an unprecedented multi-ship move that sends a clear signal to other players considering the future of their elderly steam turbine vessels.”
It is essential for the future of LNG shipping that most of the ships that are ordered already have a pre-negotiated long-term contract. And it’s not just Qatar Energy’s mega-order.
Constituents
There were slightly more growing companies than losing companies, which is why we will start with them. Exmar NV (BSE: EXM) became the biggest grower by one-tenth, up 6.3%. Right behind it was Flex LNG (NYSE/OSE: FLNG). Management announced some vital information in the conference call: Failure to exercise the option for the Flex Constellation will result in the contract expiring in March 2025. Even if the option was only twelve months, bridging that period would be suitable—further information related to dividends. The Q3 dividend was announced at the same amount, and the management declared its will to maintain it in the future, even if the revenues did not fully cover it.
Dynagas LNG Partners (NYSE: DLNG) was in third place but has yet to release its results. As a reminder, this partnership’s fleet consists of three steam and three TFDE tankers. Due to the contract length that expires after 2027 and TCE around $65,000, the price of the shares is moving to the highest in the last two years, gaining five per cent.
Excelerate Energy (NASDAQ: EE) has been on an upward trajectory since the beginning of this year. It added 3.6% last week, although as a result, the price on the candlestick chart started to form a bearish Evening Star pattern. The formation is now two-thirds complete and will be confirmed if the stock falls sharply this week.
Chevron (NYSE: CVX), entering a bullish phase, rose almost three per cent. Similarly, Mitsui O.S.K. Lines (TSE: 9104) rose 1.9 per cent to close just above its highs earlier this year. NYK Line (TSE: 9101) added more, 2.2 per cent, but its price still goes sideways.
Capital Clean Energy Carriers (NYSE: CCEC) rose 1.6%, and if it continues to increase this week, the uptrend is likely to continue. It is unclear whether this growth is a correction of the beginning downtrend or a continuing uptrend. We lean towards the second option.
CoolCompany (NYSE/OSE: CLCO) will report its quarterly results on November 12th. We believe this conference call will also provide crucial information on rates for new buildings. The stock was up 1.5% last week, but the trend has decreased since May.
This brings us to the titles they lost last week. Awilco LNG (OSE: ALNG) lost the most, 22.1%. We have already discussed the reasons in the introduction. The share price reached the level of 2022.
Golar LNG (NASDAQ: GLNG) experienced a loss of 10.4% after the conference call. During the call, it was announced that FLNG Hilli will move from Cameroon to Argentina in 2027, following the expiration of its contract in Cameroon in August 2026.
Korea Line Corporation (KRX: 005880) and New Fortress Energy (NASDAQ: NFE) suffered similar losses of 5.5% and 5.3%, respectively. While KLC is reaching its support, NFE is trying to stop the downtrend, although it has now corrected the previous week’s gain.
The “K” Line (TSE: 9107) fell 4.2% but moved sideways. Tsakos Energy Navigation (NYSE: TSE) continues its downtrend with a 3.8% decline. However, most of this company’s fleet consists of ships other than LNG tankers.
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