Summary
The UP World LNG Shipping Index (UPI) gained 2.45% last week, while the S&P 500 slightly declined. Despite rising LNG consumption and prices in Europe and Asia, shipping spot rates continue to drop, signalling potential stock volatility as earnings reports approach. However, the impact varies across companies based on their exposure to the spot market.
UPI’s recent rise, following weeks of marginal movements, was driven by gains from key Asian and Middle Eastern companies, notably Japan’s NYK Line (+6.1%) and Qatar’s Nakilat (+3.3%). While some firms like BP (+3.9%) and “K” Line (+3.9%) saw steady growth, others, such as Awilco LNG (-20.2%) and New Fortress Energy (-18.3%), suffered double-digit losses, primarily due to falling spot rates and market corrections.
Despite current fluctuations, the long-term outlook remains optimistic, supported by strong LNG demand and potential management-driven adjustments within industry leaders.
UPI & SPX
Last week, the UP World LNG Shipping Index (UPI), which tracks listed LNG shipping companies, gained 3.99 points, equivalent to 2.45%, closing at 167.27 points. The S&P 500 index lost 0.24%. The chart below illustrates the performance of both indices with weekly data.
Broader view
While LNG consumption and price in Europe and Asia are rising, LNG shipping spot rates continue to fall. The first real impact on company performance will soon be heard during the conference calls, so we await increased stock price volatility. However, not all companies have some of their vessels on the spot market.
Constituents
Although three companies posted double-digit declines in the past week, the UPI rose significantly after three weeks of 0.4% moves. This is partly due to the small weighting of declining companies and, conversely, the growth of companies with a higher weighting, although this growth was far from double-digit. These companies were predominantly Asian and Middle Eastern. Despite these moves, many companies are still moving sideways, the same as UPI does.
Japan’s NYK Line (TSE: 9101) was the biggest gainer, which added 6.1%. With this rise, the stock has surpassed almost the entire range it has been in since July.
Qatar’s Nakilat (QSE: QGTS) has to be mentioned second, although it was only the third biggest gainer with a 3.3% rise. But its weight in the UPI is crucial. Nakilat showed the same move for the third week, so it is back near the upper end of its range after the previous decline and could try to rise further.
Two companies had higher growth than Nakilat, and both added 3.9%. These were the other Japanese company, “K” Line (TSE: 9107) and BP (NYSE: BP). BP broke resistance and continued its uptrend after hedge fund Elliott Management took a stake, while “K” Line’s growth returned to its broken range.
Tsakos Energy Navigation (NYSE: TSE) had its sights set on higher growth, but “only” 2.5% of it remained. From a purely technical analyst’s standpoint, it is possible that the rejection of the higher price formed a corrective top before the downtrend continued.
Chevron (NYSE: CVX) notched a 2.3% gain, but that didn’t matter, and the stock remained in the middle of its range.
The chart of MISC (KLSE: 3816) shows a similar trend to TEN. Here, too, the higher growth was rejected, leaving +1.9%.
Excelerate Energy (NASDAQ: EE) is near the lower end of its range. Higher growth was also rejected, leaving 1.3%, but the exchange rate is moving sideways here.
Mitsui O.S.K. Lines (TSE: 9104) and Capital Clean Energy Carriers (NASDAQ: CCEC) show minuscule interesting moves. The Japanese company is up 0.9%, while the Greek company is up 0.3%. Both, and CCEC in particular, have been steadily gliding higher.
The three double-digit decliners are represented by Awilco LNG (OSE: ALNG), New Fortress Energy (NASDAQ: NFE), and Cool Company (NYSE/OSE: CLCO), which wrote off 20.2%, 18.3%, and 15.1%, respectively. While further declines in spot rates and upcoming quarterly results are to blame for ALNG and CLCO, NFE could be due to a course correction or the impact of new U.S. duties.
Dynagas LNG Partners (NYSE: DLNG) accelerated its decline by a gap, writing off 8.2%. It stalled at the support of the previous range.
Flex LNG (NYSE/OSE: FLNG) experienced a 2.2% decline over the week despite reporting strong quarterly results. The stock price is now at the lower end of its range, close to the significant $25 support level. During the recent conference call, management announced plans to delist from OSE as part of their cost-cutting measures. This is the first example of a management-driven decision by any UPI constituent, further improving its position. We look forward to welcoming other UPI constituents to react to complex conditions.
Crystal Ball
Our short-term outlook stays unchanged and is cautiously optimistic, but we await rising volatility. The decline of spot rates is still marginal for most UPI constituents, and demand for LNG growth is still strong. Our long-term view is still positive, and we expect situationally or management-driven actions and potential new long-term contracts.
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