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LNG shipping stocks: A temporary decline

Monday, 17 June 2024 | 13:00

In the week of June 15, 2024, the UP World LNG Shipping Index (UPI) experienced a significant drop of 4.25%, closing at 155.45 points, while the S&P 500 index gained 1.58%. Despite this downturn, some LNG shipping companies showed growth, with Nakilat, Golar LNG, and Awilco LNG rising by about 3-3.5%. Conversely, Flex LNG saw a notable decline due to expectations of a weaker second quarter. Japanese firms “K” Line, NYK Line, and Mitsui O.S.K. Line also weakened the index. Other companies like New Fortress Energy and Asian shares like Korean SM KLC and Malaysian MISC Bhd also declined. However, Exmar gained 2.1%, but Cool Company returned down to its previous value. The decline in UPI is seen as temporary, with expectations of a rebound as the real summer season approaches.

Week 24-2024: Chart of the UP World LNG Shipping Index with S&P 500 (Source: UP-Indices)

UPI & SPX
Last week, UPI, which tracks LNG shipping companies, dropped significantly by 6.9 points or 4.25%, closing at 155.45 points. In contrast, the S&P 500 index gained 1.58%. The chart below illustrates this divergence in performance.

Broader view
Despite a more significant downward movement in the UP World LNG Shipping Index (UPI), the two largest companies in the index, Nakilat and Golar LNG, have shown remarkable resilience. After several small movements, the UPI halted precisely at the upper limit of last year’s area, acting as a support. This pause, likely due to timing at the end of the week, suggests a temporary condition rather than a shift in market sentiment, instilling confidence in the sector’s stability.

The early start to the summer season saw Asian buyers capitalising on the off-season, boosting UPI initially. However, this momentum has now slowed, leading to the recent drop. It’s important to note that despite this, there appears to be no inherent weakness in the LNG shipping sector, and the decline is viewed as a temporary setback. Spot rates for renting tankers have increased, and gas prices are gradually rising, indicating the approaching summer season.

Constituents
While the overall trend was downward, some companies showed promising growth. Only three companies grew last week, each seeing a significant three per cent growth. Notably, Nakilat (QSE: QGTS), Golar LNG (NASDAQ: GLNG), and Norwegian company Awilco LNG (OSE: ALNG) led with a 3.5% increase. This growth of ALNG can be attributed to the successful closing and completion of the up to 12-year sale/leaseback facility. Nakilat rose to new all-time highs, and GLNG signed a contract with Nigeria´s NPCC on its floating LNG on June 11.

Flex LNG (NYSE/OSE: FLNG) experienced a significant decline, coinciding with the ex-dividend date and expectations of a weaker second quarter. FLNG aims to find support at $25.

The Japanese trio, “K” Line (TSE: 9107), NYK Line (TSE: 9101), and Mitsui O.S.K. Line (TSE: 9104) weakened UPI, losing 5.9%, 5.4%, and 4.7% respectively.

New Fortress Energy (NASDAQ: NFE) continued its decline, falling by 5.3%, though reactions toward the end of 2022 suggest some support for slowing this decrease.

Other Asian shares, Korean SM KLC (KRX: 005880) and Malaysian MISC Bhd (KLSE: 3816), dropped by 3.1% and 2.7%, respectively.
The three drilling companies experienced less significant losses than the previous week. Shell (NYSE: SHEL) and BP (NYSE: BP) initially attempted growth at the start of the week, but this did not last, resulting in Shell losing 0.6% and BP 1%. Chevron (NYSE: CVX) saw a decrease of 2.2%.

Cool Company (NYSE/OSE: CLCO) bounced back to $11, the same value achieved during its three-week growth attempt in May. It took three weeks to return to this value.

Except for Exmar (BSE: EXM), which gained 2.1%, most other movements saw losses of around one per cent.

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 18 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.
Source: By Tomas Novotny, UP-Indices.com

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