Drewry: lng shipping equity index up 16.3pc during 2023
The Drewry LNG Shipping Equity Index increased 16.3 percent YTD (as of 13 July 2023), underperforming the S&P 500, which rose 17.5 percent during the same period. The stock price of Nakilat jumped 14.5 percent, that of Golar LNG increased 3.6 percent, while Flex LNG’s declined 4.8 percent. In June, Nakilat and Flex LNG share prices increased 3 percent and 2.5 percent respectively but Golar LNG’s declined 1.9 percent. Nakilat stock has benefited from a steady rise in JV income (both from shipyard and LNG/LPG JVs) in the last few quarters, potential LNG shipping orders from QatarEnergy and decent 1Q23 results despite increased expenses. The company’s revenues are expected to be resilient despite the ongoing softness in spot shipping rates as it has long-term charter contracts extending to 2032-35. Spot LNG shipping rates have started recovering, with those for TFDE vessels up 48 percent MoM in June.
Ship recycling bogged down as monsoon period is in full swing
The ship recycling activity has been slow so far, with minimal transactions. In its latest weekly report, shipbroker said that “market conditions are rather sluggish this week where few, if any, transactions are being negotiated, creating a sluggish vibe within the recycling community. The slow feel for the year is highlighted by the fact that not a single VLCC/Suezmax/Aframax conventional tanker unit has been sold for recycling in the first 7 months of this year, a feat not seen since 1970. This is attributed to the ever-growing ‘dark’ tanker fleet, which has sucked all candidates away from the recycling market over the past two years. Some negative sentiment seemed to echo across the Indian sub. Continent recycling destinations this week with all areas expressing a downward trend in their respective price indications. This is primarily on the back of the monsoon onslaught currently being experienced and weakened domestic steel markets. Interesting reports arrived in the media this week with news that Petrobras has committed one of their FPSO’s internally to a Brazilian green recycling yard.
From heavy industries to high-tech: HD Hyundai turns the page
In an increasingly complex world with multiple challenges, HD Hyundai has decided to transform from a shipbuilder to a high-tech-focused “future builder” company developing solutions for decarbonization and digitalization. When Hyundai Heavy Industries Group changed its name to HD Hyundai in December 2022 in the context of its 50th anniversary celebrations, the intention was to highlight a major change of focus. The recent opening of the company’s new Global R&D Center (GRC) in the Pangyo region, Korea’s “Silicon Valley”, was another manifestation of this strategic shift: under the leadership of CEO Kisun Chung, the grandson of Hyundai Group founder Ju-yung Chung, HD Hyundai has seen a transformation from a heavy industries corporation to an enterprise with a strong focus on technology development.
Shipbuilding industry entering a new growth era
Demand for “green” ships is expected to boom over the coming years, already prompting the reopening of decommissioned shipyards, especially in China, while yard utilization percentages are also on the rise. In its latest weekly report, shipbroker said that “during the first 6 months of 2023, a total of 719 vessels have been contracted, out of which 24.2 percent were bulkers, 23.09 percent were oil tankers (crude & products), 9.46 percent were containers, 5.01 percent were LPG carriers and 4.31 percent were LNG carriers. Despite the fact that 2023 orders were dominated by bulkers and tankers, the orderbook for both tankers and dry bulk vessels remains at historically low levels against a backdrop of uncertainty around the energy transition framework and increased newbuilding prices. Instead, the orderbook mix seems to evolve and is largely shaped by orders for LNG carriers and container vessels”.
Tankers: Argentina emerging as crude oil export destination
Argentina is expected to contribute more export seaborne cargoes of crude oil, as production ramps up, while consumption isn’t. In its latest weekly report, shipbroker said that “the explosive growth in Americas crude production has repeatedly focused on prospects in the United States, Guyana, Brazil and Canada. In the US, developments in the shale sector have been closely monitored, with regular data and the involvement of public companies allowing for closer scrutiny of developments. In Guyana, Brazil and Canada, longer term E&P projects and the use of FPSOs or major pipeline developments allow for easier analysis of future production volumes. However, with much less international focus and much of the production growth dependent on unconventional sources (i.e. shale), Argentina has failed to attract as much international attention.
Dry bulk market: capesize market on the decline for yet another week
This week began on a positive note in the Pacific market, with all three major players actively participating and securing vessels at more favourable rates. However, the momentum quickly dissipated and the market experienced a decline in rates as the week progressed, with a shift in sentiment due to a growing abundance of available vessels. The C5 market in particular experienced a decline compared to the beginning of the week. Similar downward pressure was observed in the South Atlantic market from Tubarao to China, with an increasing number of vessels in ballast, further impacting rates. By mid-week there was a stabilisation to the declining rates in the Pacific. The North Atlantic witnessed heightened activity, leading to increased volume and a scarcity of available tonnage, resulting in notable firm fixtures being concluded. As the week draws to a close, there has been continued downward pressure on rates in the Pacific.