- ising LNG demand contrasts with falling spot rates, leading to potential stock volatility.
- Asian and Middle Eastern firms led gains, while some companies saw declines.
- The long-term outlook remains positive despite short-term volatility.
The UP World LNG Shipping Index gained 2.45 percent last week while the S&P 500 declined modestly. Shipping spot rates continue falling even amid soaring LNG demand and surging prices in Europe and Asia. That should translate to some stock volatility as earnings reports approach. All depends on a line-item view of the companies’ exposure to the spot market, though, reports LNG Shipping Stocks.
Index Comparison
The recent increase for UPI had been preceded by weeks of insignificant movements and stemmed from increases on major Asian and Middle Eastern clients. Japan’s NYK Line led the field with a gain of 6.1 percent, while Nakilat on Qatar followed with a rise of 3.3 percent. Firms like BP and K Line have sustained increases of 3.9 percent, but Awilco LNG and New Fortress Energy witnessed double-digit decreases, largely influenced by the deterioration in spot rates and market correction.
Last week, the UP World LNG Shipping Index, which monitors listed LNG shipping companies, increased by 3.99 points to 167.27. On the other hand, the S&P 500 decreased by 0.24%. The following chart depicts the weekly performance of both indices.
Market Trends and Stock Volatility
While LNG demand and prices both in Europe and Asia are high, falling shipping spot rates prove to be more of a stumbling block. These will only add to the volatilities and uncertainties in stocks as the coming conference calls unravel the real meaning of this.
Not all shipping companies have their vessels in spot markets, but the impact here is uneven.
Company-Specific Performance
Last week, three companies posted double-digit declines and yet the UPI soared after three weeks of marginal movements. This growth is partially due to the smaller weighting of the companies that declined and the higher weighting of those that gained, especially in Asia and the Middle East. While there has been commotion on the UPI front, many companies trade sideways, much like the UPI.
Japan’s NYK Line
Japan’s NYK Line was the biggest winner, up 6.1%, and broke its range established in July. Qatar’s Nakilat also had a 3.3% increase, and the stock is close to the higher end of its range after a prior decline. Another key mover was BP, which rose 3.9% after the hedge fund Elliott Management acquired a stake. BP broke resistance and continues on an uptrend. K Line was another, like BP, that rose 3.9% and is back in its prior range.
Tsakos Energy Navigation once had the promise of bigger growth but averaged only a 2.5% increase. Chevron managed a 2.3% advance, but shares are still in the middle of their trading range. MISC’s January growth was about the same, only to be rejected at higher levels for a 1.9% gain. Excelerate Energy managed a 1.3% advance, but it’s near the lower end of its range. Mitsui O.S.K. Lines and Capital Clean Energy Carriers moved little; the former inched up by 0.9%, the latter by a mere 0.3%, but have recently been on quite a roll.
Company-Specific Performance
The largest loss, at 20.2%, was sustained by Awilco LNG, while New Fortress Energy lost 18.3% and Cool Company 15.1%. Declining spot rates as well as upcoming earnings reports contributed to the losses in Awilco LNG and Cool Company, but New Fortress Energy’s decline may be attributable to market corrections or the new U.S. duties.
Dynagas LNG Partners took the free fall to another level with an 8.2% drop to a significant support level. Flex LNG reported a 2.2% loss even as the company released quarterly results. Its stock is now near a critical $25 support level. The management disclosed its decision to delist from OSE as part of its cost-cutting measure. It marked the first time that management was forced to adjust one of the UPI constituents in light of market conditions.
Outlook and Future Expectations
The short-term view is cautiously optimistic but with increased volatility. The spot rate decline remains negligible for most UPI constituents, and LNG demand continues growing. Long-term projections are positive with anticipation of situationally or management-driven actions and new long-term contracts to drive market dynamics.
Did you subscribe to our daily Newsletter?
It’s Free Click here to Subscribe!
Source: LNG Shipping Stocks
