LNG Is on Fire

The liquified gas market is on “fire”. The Japan Korea market or JKM is well above the $ 20 a MBTU whereas the HENRY HUB is at $2.76 . The arbitrage between the USA and SOUTH EAST ASIA has never been so good.

On top of this, winter is very cold everywhere. Record snow fall in Madrid, Freezing cold in North East Asia. LNG cargoes are well chased after and the LNG vessel Georgiy Brusilov on its trip from YAMAL to Rotterdam has already changed direction three times.

Because of long delays at the Panama Canal, LNG tankers have to take the long route increasing the Ton/Mile equation but also the scarcity of vessels available. Consequently, a BP chartered tankers has seen levels of $350,000 day rates and the average Pacific route is above $220,000 daily from less than $90,000 in December.

We have increased the LNG exposure of our fund to 20% as LNG tankers stock prices are lagging this phenomenon.

FLEX LNG still trades on its lows when the fleet has increased, is modern and mostly on spot. Longer term, as Asia switches its coal powered electricity stations to gas, we will see a need for 800 million tons of yearly LNG capacity, 40 YAMAL to be created by 2040 and a significant increase of LNG shipping capacity.

We may evolve from a Seasonal Cyclical LNG market to a secular growth one… Plenty of opportunities for FSRUs (Hoegh), Shipping (Flex) and Engineering (GTT).