Covid-19-induced lower LNG demand has weakened LNG trade with many LNG cargoes being cancelled in the US, but the LPG sector is proving more resilient, according to Drewry Financial Research Services Ltd
“LNG supply glut and feeble LNG trade are weighing on spot LNG freight rates,” said Drewry. Share prices of key LNG shipping companies have declined 36.8% year-to-date (YTD), but those with their fleet on long-term charter have done well. One of those is Qatari gas shipping company Nakilat, with its share price rising 14.5% YTD, said Drewry.
This year Nakilat has been transitioning vessels under its full ship management. In May, the 216,300-m3 Q-Flex LNG carrier Al Kharaitiyat was transferred from Shell Trading and Shipping Company Ltd (STASCO) to Nakilat Shipping Qatar Ltd. Nakilat now has 20 ships under its management, comprising 16 LNG carriers and four LPG carriers.
Overall, Drewry said LNG stock prices have been relatively resilient in the last month and have declined only 2.6% on an average as spot LNG freight rates seem to have found a floor.
Positive outlook for LPG
The LPG shipping sector has fared better than its LNG counterparts despite the coronavirus affecting the energy demand. “We still retain our positive outlook for the sector for the period between 2020 and 2024, supported by robust annual growth of 3% in the LPG trade during the period,” said Drewry. LPG demand from the petrochemical industry is expected to suffer as petrochemical owners look to use cheaper naphtha as a feedstock instead of LPG.
Meanwhile, petrochemical and ammonia trades will contract in 2020 due to weak demand amid oversupply, according to Drewry. Overall, LPG trade is expected to grow at a low 0.8% in 2020.
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