LNG shipping

[yadayada]

If you dont like shipping because it is such a commoditized industry, but the LNG shipping market looks different:

http://www.ft.com/cms/s/0/63aa4154-52ca-11e3-8586-00144feabdc0.html#axzz2rVgYTQWT

 

2 barriers to entry, enormous costs of a lng tanker, and not every idiot with capital can operate one due to safety risks of these things. Unlike the tanker and dry bulk market. Plus there is limited supply in the next 2-3 years and demand seems to be ramping up.

Report on the LNG market:

http://www.marinemoney.com/sites/all/themes/marinemoney/forums/MMWeek13/presentations/Wednesday/4_00%20PM%20Doug%20Mavrinac-LPG.pdf

 

Personally think you want to look at stocks that have a decent amount of ships on the spot market instead of tied up in long term charters.

 

Currently spot rates have slumped back from 160k$ a day to about 80k$ due to limited new plants coming online this year. But there will be coming alot of new capacity coming online in 2014 and 2015 providing demand for lng carriers.

 

Some interesting points from that report:

 

LNG carrier current orderbook/fleet ratio remains below average levels at ~28.5% of

existing fleet

 Speculative ordering remains limited due to significant capital requirements, limited

bank financing availability, and technical expertise required

 Relatively few shipyards possess technical know-how to build an LNG ship; existing

newbuilding orders placed at only 8 shipyards.

 China has yet to get up the learning curving on building LNG ships with just 1yard

building ships and at a higher cost than South Korean builders.

 

Thoughts?

 

[bz1516]

When I looked at LNG two years ago it looked like the issues were with regasification rather than liquefaction.  GLNG is the first name that comes to mind when thinking about LNG and the stock has done nothing for more than two years.

 

Europe has its issues with LNG competing against Russian ng and the difficulty of getting new terminals and pipelines built.  And Japan is a question mark if nuclear starts up again.  It just seems like there are a lot of moving parts to making a successful investment in this space.

[yadayada]

Yeah i also can't really find good companise that are cheap. Rates need to shoot up alot to make a good return on those stocks.

[Tug Bovine]

Why do you prefer GLNG? They have the most exposure to the spot market as their newbuilds deliver this year without contracts. I have there being around 30 ships/year being delivered in '14 and '15 and only total incremental demand for ~15 ships each year (with these weighted towards the back end of '15. To me, it seems like dayrates and utilizations have to keep coming down. i personally prefer the names with better contract coverage (eg, glog)

 

What do you think normalized dayrates should be? At 75-80k and 70% LTV, you can earn a low-mid teens roe, which seems fair to me

[yadayada]

seems to me you want at least decent exposure to the spot market. It is basicly a bet on too little supply for the next few years, but more importantly, increase in demand.

 

But like another poster said, I think there is too much moving parts, and I cannot find cheap stocks I can get comfortable with.