LNG Shipping Stocks Gained 38% Last Year, But Not All Are Winners

Summary

• The year 2021 was successful again for the LNG shipping sector as all companies managed COVID-19 successfully.
• Five companies gained more than 160%, and the best earned over 315% to the investors.
• Rising sector also brings risks to retail investors.

IgorSPb/iStock via Getty Images

The rising sector

The year 2021 was successful for the LNG (liquefied natural gas) shipping sector as transported volume increased again. It is too early to have data for the whole year, but the LNG supply rose from Q1 to Q3 2021 to 15.8 MT (Million Tons) or 6 percent versus Q1 to Q3 2020, said McKinsey.

Natural gas (NG1) strengthens its role as a global energy commodity. Its price is no longer dependent on crude oil, and many investors believe in this sector.

The UP World LNG Shipping Index (UP Index), the global benchmark for publicly-traded stocks of LNG shipping companies, gained 38% last year. If we add all paid dividends, the gain is over 41%. The overall view is helpful, but how successful were the constituents? UP Index consists of 19 global LNG shipping companies; this article focuses on the Top 5. All prices are set to US dollar.

Top gainers

The biggest gainer is the smallest company: Awilco LNG ASA [OSE:ALNG] (OTCPK:AWLNF) is up for 316.56%. This Norwegian company owns two TFDE LNG carriers was successful, among other things, because of fixing a daily time charter at 80.000 USD.

Chart of Awilco LNG ASA with the UP World LNG Shipping Index (source: UP-Indices.com)

A Japanese trio of shipping tycoons occupied the other three orders. As their stocks are dual-listed at Tokyo Stock Exchange and U.S. OTC Markets, we show both tickers. They are Nippon Yusen Kabushiki Kaisha aka NYK Line [TSE:9101] (OTCPK:NPNYY), Kawasaki Kisen Kaisha aka "K" Line [TSE:9109] (OTCPK:KAIKY), and Mitsui O.S.K. Lines aka MOL [TSE:9104] (OTCPK:MSLOY). For all these companies, the LNG shipping is only a part of their business, so to the UP Index, its weight is reduced to the share of LNG shipping. Despite our use of the word "part," it doesn't mean anything small. All three are the leading players in maritime transport of LNG as this energy source is crucial for Japan's economy.

NYK Line gained 264.7% last year (source of the chart: UP-Indices.com)

All three charts show similar development that peaks at the end of September.

Shares of NYK Line gained 264.7%, "K" Line stocks are up for 227.65%, MOL stocks gained 171.11%.

Stocks of the Japanese "K" Line rose by 227.65% (source of the chart: UP-Indices.com)

All three benefit from a recovery of Japanese stocks, a strong bulk market, and long-time charters for LNG. And also from the expansion of their fleet with ships with modern propulsion like ME-GI and XDF.

Chart of MOL with UP World LNG Shipping Index (source: UP-Indices.com)

The modern fleet is one of the most significant advantages of the fifth most successful company Flex LNG (FLNG). All its vessels have high-tech XDF propulsion, and the newbuilds come just at the right time. Stocks of FLNG gained 168.46%

Norwegian Flex LNG is listed at NYSE and Norwegian Oslo Stock Exchange (source of the chart: UP-Indices.com)

Top Losers

The most considerable losses were recorded not by the companies but by the unlucky investors whose company or partnership was delisted after a significant fall of shares. Units of Höegh LNG Partners lost over 69% last year (source of the chart: UP-Indices.com)

Last year delisted, or their delisting was announced: GasLog (ex-GLOG), Höegh LNG [OSE:HLNG], Golar LNG Partners (ex-GMLP), Teekay LNG Partners (TGP), and Höegh LNG Partners (HMLP). Only for units of TGP were offered a two-digit level.

Recovery of Teekay LNG Partners was stopped by delisting (source of the chart: UP-Indices.com)

Conclusion

The second-year with COVID-19 was successful for most of the LNG shipping companies. No cargoes were canceled as in 2020. But not all positives were turned to the stock prices.

Production of LNG is a rising sector with solid gains and enormous potential. The same applies to the maritime transport of LNG. It is not surprising that strong financial investors or business competitors want to increase their market share.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of HMLP, FLNG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Comments

[Tomas Novotny]

If you are interested in LNG shipping stocks, you can use a free version of our service at UP-Indices.com. After registration, you get full access to the UP World LNG Shipping index chart compared to S&P 500 index.
up-indices.com/...

[Tonka Town]

@Tomas Novotny Is there an ETF that tracks the UP World LNG Index as I like that the index is rebalanced as companies and situations change?

[Tomas Novotny]

@Tonka Town Hello, Thanks for your interest. There is no ETF. We benchmark the LNG shipping now.

[alphatraz]

The more I look, the more I like $FLNG

[Tomas Novotny]

@alphatraz Yes. A few weeks ago you could sell 14 Aug'22 15 P options for $1.30. Now the price is lower, but still strange. I sold these options and think what I missed in my analysis :).

[alphatraz]

Rates are skyrocketing so fast that it's actually to a shipping company's advantage at this point if they are not already booked and can thus charge higher prices...is that correct?

[alphatraz]

I wish it was easier to track these. For instance the charts for Awilco are all out of sorts

[Tomas Novotny]

@alphatraz Try directly the Oslo stock exchange or Yahoo finance, OSE: ALNG. Btw. ALNG bought shares of Cool Company, a GLNG vehicle for its 8 TFDE carriers: OSE: COOL.

[Flave]

Thomas, you always put together a good read. Thank you. Any thoughts on DLNG.

[Tomas Novotny]

@Flave Have Flave, Thank you! I don´t expect DLNG to move up before the end of refinancing, although they decrease the debts. You can use options like covered call or naked put to get some money from your investment. It is probably the only way how to get cash now.

[VIPERMAN94]

@Tomas Novotny Tomas....DLNG has book close to $9. It is small fleet,so why doesn't somebody make a bid for them? Am I wrong about the book value?

[Catskills1]

Thoughts about KMI's tanker business and its effect on the company?

[Tomas Novotny]

@Catskills1 Hello Catskills1, Thanks for reading my article. I am not sure if Kinder Morgan owns an LNG tanker. I only know about some product tankers, so I can´t answer. Does anybody have the answer?

[Chancer]

Although shippers had a great 2021, I doubt I will ever buy any again, as I never made $ in any. It is one of many sectors I avoid.

[Tomas Novotny]

@Chancer Hello Chancer, Thanks for reading. You are not the only investor who found the ugly face of the maritime. If you find a method and sector you like, congrats!