The Drewry LNG Shipping Equity Index increased 16.3% YTD (as of 13 July 2023), underperforming the S&P 500, which rose 17.5% during the same period. The stock price of Nakilat jumped 14.5%, that of Golar LNG increased 3.6%, while Flex LNG’s declined 4.8%. In June, Nakilat and Flex LNG share prices increased 3% and 2.5% respectively but Golar LNG’s declined 1.9%.

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% MoM in June. Spot rates strengthened on improved chartering activity, mainly in the Atlantic basin, entailed by production setbacks in the region’s top suppliers (Norway and US). The recent LNG FID for the 2.7 mtpa Rio Grande LNG export project in the US bodes well for the long-term prospects of the LNG shipping sector.

LPG stocks under our coverage surged in 2023 YTD (as of 13 July 2023) due to strong freight rates and robust 1Q23 results. Stock prices of BW LPG, Stealth Gas and Navigator Holdings increased 33.6%, 59.4% and 16.1%, respectively.

Stealthgas share price surged due to the company’s plan to enter the bigger LPG vessel segment, its ongoing deleverage and share buyback programme, and robust 1Q23 results. The company is divesting its smaller-sized vessels and looking to diversify into bigger vessels. It recently sold four small-sized LPG vessels at a profit in June, which is expected to benefit its 2Q22 cash flows.

LPG shipping rates were robust in most of 2Q23, bolstered by increasing US LPG exports to Asia, reducing Panama Canal waiting time, widening arbitrage influenced by large inventory build-up in the US and improving petrochemical demand in Asia. Increasing Asian and European petchem demand, the transition from naphtha to LPG as feedstock and tight vessel availability also supported the freight rates. However, dismal demand due to seasonality and concerns over the economic slowdown impacting China’s recovery will lead to a correction in shipping rates in 3Q23

Source: Drewry Maritime Financial Research