Off-Season Commences For LNG Shipping As UPI Experiences Decline

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  • The off-season for LNG shipping has begun as reflected in the recent performance of the UP World LNG Shipping Index (UPI).
  • Last week, the UPI lost 4.12%, returning to the 2023 range, indicating a shorter winter peak.
  • This shift is attributed to low demand, high supplies, and the impact of longer shipping routes around the Cape of Good Hope.
  • The decline in LNG shipping shares and natural gas prices is notable, with the Henry Hub approaching the minimums of 2020.

Performance of UPI and S&P 500

The UP World LNG Shipping Index (UPI) saw a decline of 4.12% in the past week, closing at 153.77 points. In contrast, the S&P 500 (SPX), representing U.S. stocks, experienced a 1.37% gain. The UPI’s return to the 2023 range suggests that the winter peak this year was short-lived. Investors in LNG shipping seem to be entering the off-season, potentially waiting for summer or geopolitical developments before re-engaging.

Factors Contributing to Off-Season

The off-season for LNG shipping is influenced by low demand, high supplies, and the longer shipping route around the Cape of Good Hope. These factors have led to a decrease in the shares of LNG shipping companies and a decline in natural gas prices, with Henry Hub currently nearing the minimums of 2020. Time charter rates for LNG shipping have stabilized, possibly due to the increased use of vessels for the longer route.

Impact on LNG Shipping Companies

Last week, Flex LNG (FLNG) experienced a notable loss of 10.1%, with Wednesday’s earnings call failing to buoy the shares despite positive factors like dividends and potential buy-backs. Japanese companies, including NYK Line, “K” Line, and MOL, also faced losses. On the other hand, Dynagas LNG Partners and BP emerged as gainers, growing by 7.1% and 5% respectively.

Outlook and Preparation for Investors

As the off-season for LNG shipping begins earlier than expected, investors are advised to strategize for the upcoming summer. Despite high storage levels, the potential acceleration of orders due to low gas prices and rates is noted. The report emphasizes the importance of setting plans and being prepared for the market dynamics in the coming months.

About UP World LNG Shipping Index

Established in 2020, the UP World LNG Shipping Index is a rules-based stock index designed to measure the performance of publicly traded companies involved in the maritime transport of liquefied natural gas (LNG). Covering companies worldwide, the index provides insights into the global LNG carrier fleet. The report encourages investors to explore the UP Index, which offers both freemium and trial access to charts, aiding in informed decision-making.

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Source: LNG Shipping Stocks