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Tuesday, 01 September 20
COVID-19 PUSHES US LNG INTO A TIGHT SPOT - DREWRY
The pandemic-led weak projections for economic growth will derail US LNG exports in full-year 2020 with the country also losing ground in the long term due to major delays in liquefaction projects.
US LNG exports were strong between 2017 and 2019, driven by the shale gas boom, rising demand for natural gas in Asia and higher global LNG prices. The US exported 3.9 million tonnes of LNG in 2016 which increased at a whopping 114% CAGR to 38.2 million tonnes in 2019.
The US is currently the third-largest global LNG exporter with six operational LNG export terminals aggregating 62 mtpa of liquefaction capacity and another 41 mtpa capacity under construction. Brownfiled projects such as Sabine Pass, Corpus Christi, Cameron LNG and Elba Island will reach their full capacities between 2020 and 2027 and greenfield projects such as Golden Pass LNG and Calcasieu Pass will become operational during the same period.
Existing LNG production capacity in the US has been impacted by the pandemic with over 110 LNG cargoes being cancelled by Asian and European customers during June-August due to the low LNG spot price which narrowed the US-Asia and US-Europe price arbitrage. Moreover, major US LNG importers – Japan, South Korea and Taiwan – have seen their LNG demand dwindling, while US-China LNG trade has not been able to pick up as some would have hoped. With projections for LNG spot prices below $5 per MMBtu over the next few years, we expect more cancellations to occur in the coming years making the US a ‘swing LNG producer.’
The ‘second wave’ of LNG liquefaction including mega-LNG projects (such as Driftwood LNG, Port Arthur LNG, Golden Pass, Calcasieu LNG, Plaquemines LNG, Magnolia LNG, Jordan Cove LNG and Rio Grande LNG) constitute over 160 mtpa of planned liquefaction capacity. These projects were initially expected to be operational by 2025, but are currently facing major trouble in securing funding and long-term supply deals required for reaching an FID. Only two projects (Golden Pass and Calcasieu Pass LNG) have attained the FID and have started construction, while over 10 major LNG liquefaction projects which were expected to reach the FID in 2020 have been delayed due to low LNG prices and weak economic growth projections.
The future for these projects looks uncertain as most of them had fixed the all-inclusive selling price for LNG at $8 per MMBtu for Asia ($2 for Henry Hub, $3 for liquefaction, $2-3 transportation) which is highly uncompetitive in the current market. Only a marginal recovery in LNG prices is projected for the next few years which further increases the woes for promoters of the planned projects in securing funding and supply deals. Meanwhile, a major competitor for US LNG, Qatar enjoys a break-even price below $2 per MMBtu as well as proximity to the Asian market. Qatar’s North Field Expansion (NFE) project’s Phase-1 (33 mtpa) and Phase-2 (16 mtpa) are also backed by the government, increasing the probability of their completion and in the process creating more trouble for the planned US projects.
The pandemic has already created severe financial woes for some US projects. For instance, a deal between Driftwood’s promoter Tellurian and India’s Petronet LNG fell through, raising doubts over the proposed 27.6 mtpa project. Although negotiations are still underway, Tellurian faces high competition from Russian and African projects. Shell has also exited the Lake Charles LNG project, increasing the uncertainty of the project for the other participants, while Magnolia LNG’s promoter LNG Ltd has been taken over by another entity after it went bankrupt, delaying the project further.
Some projects like Lake Charles and Rio Grande have gone back to the drawing board and plan to reduce trains to decrease the capex cost while others are cutting workforce and raising loans to keep their projects afloat. Most project developers are hopingfor an easing of US-China tensions and the prospect of securinga share of the rising LNG demand in China, which is projected to grow at over 10% CAGR between 2020 and 2025. However, China’s LNG importers may not be too keen on long-term supply deals with US companies given the current low prices and the uncertainty over US-China trade relations. Ties between China and Qatar are also strengthening with the latter reserving 16 LNG carrier newbuild berths at a Chinese shipyard.
Overall, project delays are expected to hurt the US deeply in the long term while other LNG producers – Qatar, Russia and Mozambique – gain from the narrowing supply-demand gap from 2023 onwards. Qatar has already reserved LNG carrier newbuilding berths at shipyards and has selected a technology partner for the NFE project while Russia’s Arctic LNG-2 is on schedule with added investments made for Arc-7 LNG carriers and large FSUs to keep the Northern Sea Route (NSR) active most of the year.
US LNG woes have had a cascading effect on the LNG shipping market, depressing charter rates. The fall in US-Asia LNG trade has negatively affected shipping demand which, along with cancellations, has increased vessel availability in the market. At present, the fall in charter rates is arrested by a rise in floating storage, but this situation is not sustainable in the long term with LNG prices remaining depressed and over 120 LNG carriers scheduled to be delivered during 2020-21.
An estimated 140 new orders for LNG carriers during 2020-23 would be left hanging if the planned US LNG projects fail to progress. The loss of orders will impact LNG shipyards which have already begun to reel under low orders (only eight vessels were ordered in 1H20). While project-linked ordering from Qatar, Russia and Mozambique will bring some respite the drying up of speculative orders will most certainly be a huge loss for the LNG shipping market as a whole.
To conclude US LNG exports will grow at a slower pace in the coming years as long-term supply deals have already been signed for the under-construction projects. However, stiff competition from other producers amid low LNG prices will impact their share in the Asian market. The fall in US-Asia trade will negatively impact shipping demand and further reduce the number of vessels required for LNG trade. Overall, we expect US LNG exports to be seasonal in the long run with Europe playing a much larger role in the future.
Source: Drewry
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Thursday, 10 September 20
U.S. COAL PRODUCTION IN 2020 TO BE 511 MMST, 28 PER CENT LOWER THAN IN 2019 - EIA
EIA expects total U.S. coal production in 2020 to be 511 million short tons (MMst), 194 MMst (28%) lower than in 2019. Mitigation efforts related t ...
Thursday, 10 September 20
DRY BULK SHIPPING: CHINA'S DEMAND KEEPING THE DRY BULK MARKET GOING - PETER SAND | BIMCO
Overview
An impressive recovery in Chinese dry bulk imports has protected the industry from the effects of falling demand in the rest of the wo ...
Thursday, 10 September 20
TANKER SHIPPING: FREIGHT RATES BACK AT LOSS-MAKING LEVELS AFTER 12 VERY PROFITABLE MONTHS - BIMCO
Overview
A stunningly strong 12 months for the tanker shipping industry is now being replaced by lower freight rates, as lower oil product ...
Thursday, 10 September 20
INDIA'S COAL IMPORTS STUMBLE IN AUGUST, RAISING RISK OF SLOW RECOVERY - REFINITIV | BANCHERO COSTA
After posting a mild recovery in July, India's coal imports have stumbled in August as the South Asian nation battles to restart it ...
Thursday, 10 September 20
THE FIRST 8 MONTHS OF 2020, INDONESIA EXPORTED 217.4 MLN TONNES OF COAL BASED ON REFINITIV - BANCHERO COSTA
The coal market has been hit by a weaker global economy as a result of COVID-19 pandemic and falling industrial electricity demand ...
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- San Jose City I Power Corp, Philippines
- Australian Coal Association
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Makarim & Taira - Indonesia
- Kideco Jaya Agung - Indonesia
- Attock Cement Pakistan Limited
- Sojitz Corporation - Japan
- Australian Commodity Traders Exchange
- Asmin Koalindo Tuhup - Indonesia
- Orica Mining Services - Indonesia
- Madhucon Powers Ltd - India
- Savvy Resources Ltd - HongKong
- Global Business Power Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- SN Aboitiz Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Merrill Lynch Commodities Europe
- Wilmar Investment Holdings
- Sree Jayajothi Cements Limited - India
- Dalmia Cement Bharat India
- Bahari Cakrawala Sebuku - Indonesia
- Ambuja Cements Ltd - India
- Power Finance Corporation Ltd., India
- Commonwealth Bank - Australia
- Sical Logistics Limited - India
- Orica Australia Pty. Ltd.
- Directorate Of Revenue Intelligence - India
- Salva Resources Pvt Ltd - India
- Eastern Energy - Thailand
- Ind-Barath Power Infra Limited - India
- Price Waterhouse Coopers - Russia
- Thiess Contractors Indonesia
- Kartika Selabumi Mining - Indonesia
- Bhatia International Limited - India
- PTC India Limited - India
- Kumho Petrochemical, South Korea
- Bhoruka Overseas - Indonesia
- Timah Investasi Mineral - Indoneisa
- Malabar Cements Ltd - India
- VISA Power Limited - India
- Bukit Baiduri Energy - Indonesia
- Vizag Seaport Private Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- Sakthi Sugars Limited - India
- GAC Shipping (India) Pvt Ltd
- Independent Power Producers Association of India
- Videocon Industries ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Posco Energy - South Korea
- Karaikal Port Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- GMR Energy Limited - India
- Oldendorff Carriers - Singapore
- Jaiprakash Power Ventures ltd
- Energy Development Corp, Philippines
- Mercator Lines Limited - India
- Antam Resourcindo - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Parry Sugars Refinery, India
- Renaissance Capital - South Africa
- Petrochimia International Co. Ltd.- Taiwan
- Toyota Tsusho Corporation, Japan
- Pipit Mutiara Jaya. PT, Indonesia
- Marubeni Corporation - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Energy Exchange, India
- Pendopo Energi Batubara - Indonesia
- Vedanta Resources Plc - India
- Minerals Council of Australia
- International Coal Ventures Pvt Ltd - India
- Coal and Oil Company - UAE
- Aditya Birla Group - India
- South Luzon Thermal Energy Corporation
- LBH Netherlands Bv - Netherlands
- Bhushan Steel Limited - India
- Thai Mozambique Logistica
- Banpu Public Company Limited - Thailand
- Parliament of New Zealand
- Siam City Cement - Thailand
- Karbindo Abesyapradhi - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Indogreen Group - Indonesia
- MS Steel International - UAE
- Tamil Nadu electricity Board
- Energy Link Ltd, New Zealand
- Simpson Spence & Young - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Indika Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Latin American Coal - Colombia
- Coastal Gujarat Power Limited - India
- White Energy Company Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- Borneo Indobara - Indonesia
- Semirara Mining Corp, Philippines
- London Commodity Brokers - England
- Meralco Power Generation, Philippines
- New Zealand Coal & Carbon
- Semirara Mining and Power Corporation, Philippines
- Cement Manufacturers Association - India
- Coalindo Energy - Indonesia
- Riau Bara Harum - Indonesia
- Kaltim Prima Coal - Indonesia
- Chettinad Cement Corporation Ltd - India
- The State Trading Corporation of India Ltd
- Meenaskhi Energy Private Limited - India
- The Treasury - Australian Government
- Bharathi Cement Corporation - India
- Standard Chartered Bank - UAE
- Kalimantan Lumbung Energi - Indonesia
- Manunggal Multi Energi - Indonesia
- Mjunction Services Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Rio Tinto Coal - Australia
- Sindya Power Generating Company Private Ltd
- Barasentosa Lestari - Indonesia
- Heidelberg Cement - Germany
- Gujarat Sidhee Cement - India
- Bukit Makmur.PT - Indonesia
- Petron Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Goldman Sachs - Singapore
- Africa Commodities Group - South Africa
- Kobexindo Tractors - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Star Paper Mills Limited - India
- Aboitiz Power Corporation - Philippines
- Central Electricity Authority - India
- Global Green Power PLC Corporation, Philippines
- ASAPP Information Group - India
- Binh Thuan Hamico - Vietnam
- PowerSource Philippines DevCo
- Metalloyd Limited - United Kingdom
- Electricity Authority, New Zealand
- Mintek Dendrill Indonesia
- European Bulk Services B.V. - Netherlands
- Ceylon Electricity Board - Sri Lanka
- Carbofer General Trading SA - India
- Central Java Power - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- ICICI Bank Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Samtan Co., Ltd - South Korea
- Larsen & Toubro Limited - India
- Economic Council, Georgia
- Lanco Infratech Ltd - India
- Indo Tambangraya Megah - Indonesia
- Indonesian Coal Mining Association
- Leighton Contractors Pty Ltd - Australia
- Cigading International Bulk Terminal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Alfred C Toepfer International GmbH - Germany
- Romanian Commodities Exchange
- Indian Oil Corporation Limited
- GVK Power & Infra Limited - India
- Deloitte Consulting - India
- Holcim Trading Pte Ltd - Singapore
- Tata Chemicals Ltd - India
- Ministry of Finance - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Chamber of Mines of South Africa
- Electricity Generating Authority of Thailand
- IEA Clean Coal Centre - UK
- Edison Trading Spa - Italy
- McConnell Dowell - Australia
- Essar Steel Hazira Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Bayan Resources Tbk. - Indonesia
- Mercuria Energy - Indonesia
- Ministry of Mines - Canada
- Anglo American - United Kingdom
- Siam City Cement PLC, Thailand
- Formosa Plastics Group - Taiwan
- Uttam Galva Steels Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Intertek Mineral Services - Indonesia
- Gujarat Electricity Regulatory Commission - India
- TeaM Sual Corporation - Philippines
- Planning Commission, India
- Interocean Group of Companies - India
- Bulk Trading Sa - Switzerland
- Trasteel International SA, Italy
- Port Waratah Coal Services - Australia
- SMG Consultants - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Medco Energi Mining Internasional
- Altura Mining Limited, Indonesia
- Wood Mackenzie - Singapore
- Directorate General of MIneral and Coal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- India Bulls Power Limited - India
- Georgia Ports Authority, United States
- Bank of Tokyo Mitsubishi UFJ Ltd
- Therma Luzon, Inc, Philippines
- Xindia Steels Limited - India
- Grasim Industreis Ltd - India
- CNBM International Corporation - China
- Global Coal Blending Company Limited - Australia
- Singapore Mercantile Exchange
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Baramulti Group, Indonesia
- Kapuas Tunggal Persada - Indonesia
- The University of Queensland
- Eastern Coal Council - USA
- SMC Global Power, Philippines
- Iligan Light & Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Bangladesh Power Developement Board
- Kepco SPC Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Agrawal Coal Company - India
- Miang Besar Coal Terminal - Indonesia
- Ministry of Transport, Egypt
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