The Weekly JMP Report

May 31, 2021

Good morning and welcome to this week’s JMP Report.

Last week we saw BSP List on the Australian Stock Exchange (ASX) on Wednesday, May 26th. The stock (BFL stock code) is yet to trade. On the local front BSP went ex-dividend on the opening of trade on Friday the 28^th and traded as high as K12.30 but fell to close at K12.00 again.

Stocks trading last week were BSP, CCP, OSH, NCM, KAM and CPL. BSP traded  683,635 shares with a day trade high of K12.30 and settle back down to close at K12.00, CCP had 210,935 shares trade at K1.90 up almost 12% from K1.70, OSH traded 1,176 shares at K10.50, NCM had 216 shares trade at K75.00 and KAM on the other hand  traded 44,384 shares at K1.08 up almost 3% from K1.05. CPL traded 10,000 shares at K0.70.

Refer below for details.

 

WEEKLY MARKET REPORT 24.05.21 – 28.05.21
STOCK	QUANTITY	CLOSING	CHANGE	% CHANGE
BSP	683,635	12.00	–
KSL	–	3.25	–
OSH	1,176	10.50	–
KAM	44,384	1.08	0.03	3
NCM	216	75.00	–
CCP	210,935	1.90	0.20	12
CPL	10,000	0.70	–

On the interest rate front we saw the TBill 364 auction results @ 7.20%. The system is very liquid and we are likely to see the short end of the market continue to trade at these flat rates.

We can find Finance company money from 5.50% and higher. In the long end there are some very good deals in the shorter end of the market. The long end is well sort after with very little stock on offer. Did I hear there may be a Bond issue in June, watch this space.

 

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What we have been reading this week

Strong Asian LNG demand soaks up India cargo diversions amid COVID-19 crisis

Yi-Le Weng, Shermaine Ang and Eric Yep 

LNG sellers capitalize on strong spot prices amid cargo diversions

India’s gas-fired power demand drops 24% on year in H1 May: Platts Analytics

Price impact of India diversions only about 5 cents/MMBtu: Citigroup

Strong Asian LNG demand for summer and tight supply amid maintenance and outages at multiple terminals have helped the market absorb the spot LNG cargoes rejected by India due to its COVID-19 related lockdowns, according to traders and market participants.

This has muted the market impact of the diversions and enabled Indian gas importers and their suppliers to find alternate destinations for contracted LNG volumes without any force majeure notices being issued or triggering any major disputes, they said.

In contrast, during India’s first nationwide coronavirus lockdown in late March 2020, its gas demand plunged and gas companies Gujarat State Petroleum Corp. and GAIL Ltd. had to issue force majeure notices to their suppliers for March-April delivery cargoes to LNG terminals like Dahej, Mundra and Dabhol, which exerted downward pressure on regional LNG prices.

This time around, LNG sellers were able to offer the diverted term cargoes in the spot market — and fetch a higher price — amid sustained high spot LNG price levels. The S&P Global Platts JKM was assessed at $10.47/MMBtu on May 21, nearly five times the assessment on May 22, 2020, at $2.15/MMBtu.

A Singapore-based trader said that a term cargo priced at a 13% slope to Dated Brent, which works out to around $8.60/MMBtu, could be sold at a 15% slope or more than $10/MMBtu in the spot market, making it profitable for traders to divert unwanted LNG. “It’s a win-win for diversions from India,” the trader said.

Asia’s spot LNG market is being supported by unprecedented LNG demand from North Asia, especially China, where economic activity has been relatively robust in 2021 on the back of recovery from the pandemic.

“The market is quiet about the diversions from India, which have not affected the market at all,” an Atlantic Basin LNG supplier said.

Several LNG carriers headed for Indian ports have been diverted in recent weeks; the South Korea-flagged HL Ras Laffan was diverted from Dahej to South Korea on May 15-16, and other vessels were previously diverted to Fujian, Europe and the Middle East, according to shipbrokers and vessel tracking data.

India’s state gas company GAIL was heard seeking an LNG cargo for June 11-13 delivery to Hazira terminal, but this was due to disruptions at ONGC’s offshore gas production platform on the west coast due to Cyclone Tauktae, which recently damaged offshore vessels, killing dozens.

COVID-19 impact

India’s gas-fired power generation has dropped as economic activity remains affected in several states by restrictions to stem the coronavirus resurgence.

“India’s power generation from gas-fired power plants averaged 4.7 GW for the first half of May, which is 1.5 GW lower year on year. This is equivalent of a decline in gas demand of about 10 million cu m/day,” said Andre Lambine, Senior Power Analyst at S&P Global Platts Analytics.

While Indian gas importers have largely backed away from the heavy spot market procurement seen earlier this year, the reduction in buying interest is also partly due to the high spot prices.

Citigroup in a May 24 update said that various firms in India have requested cancelling or delaying some of their LNG deliveries, particularly for June, but at the same time the Indian market was also highly sensitive to high LNG prices, both spot and oil-indexed, that have reduced its appetite for LNG.

“Although such cancelations or delays, if realized, would make available more LNG for the rest of the market globally, the actual number of cargoes freed up might not be large,” Anthony Yuen, Managing Director and Head of Commodities Strategy for Pan-Asia at Citi, said in the report.

To put Indian volumes into context, Yuen said India has been importing about 3 Bcf/d of LNG in recent months, with around 2.6 Bcf/d believed to be under contract, and cutting 0.5 Bcf/d of LNG imports for a month might only amount to about 15 Bcf, or 0.42 Bcm.

“To illustrate the relative size of this development, total natural gas storage in much of Europe is about 13 Bcm below the 5-year average. The price impact, using European coal-to-gas switching as a sensitivity, might only be about $0.05/MMBtu,” Yuen added.

COVID-19 induced demand destruction in India threatens some of the upside to Asian LNG prices, but overall Indian growth is still positive at more than 29 million cu m/d, keeping Asia-Pacific LNG imports over 90 million cu m/d stronger year on year, Chris Durman, Head of LNG Analytics at S&P Global Platts, said earlier in May.

“But continued further strength in the JKM is likely to cause end-users to retreat to the sidelines,” Durman added.

 

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Strong South American import demand prompts container shipping rate hikes

Author: Greg Holt 

Volumes from Asia unprecedented

China-to-Brazil contract volumes limited

Logistics expert expects rates to rise more

Freight rates to ship containers from Asia to South America are likely to increase in June as strong goods demand continues to strain the supply of empty containers and space on ships, market sources said.

German shipping line Hapag-Lloyd announced May 27 that it would begin assessing a Peak Season Surcharge for shipments from East Asia to the West Coast of South America of $1,450 per forty-foot equivalent unit (FEU) beginning June 14. That is on top of the current rate valid through May 31 of $8,850/FEU including a PSS of $700/FEU.

Prioritizing capacity

Unprecedented US import volumes mostly from Asia during pandemic lockdowns have compelled shipowners to prioritize carrying capacity for the trans-Pacific eastbound trade lane from China to the US West Coast, leaving fewer ships available to make the journey farther south to Chile, Colombia and Peru.

But import volumes from Asia are also strong in South America, and particularly in Brazil. Hapag-Lloyd also announced a $600/FEU General Rate Increase (GRI) effective June 15 for the East Asia-to-East Coast South America trade lane, adding to rates that had already climbed to $6,400/FEU including a PSS of $1,450/FEU valid through the end of May.

Shipping lines operating on China-to-Brazil trade lanes have been limiting contract volumes for shippers this year, in many cases cutting their volume allocation by half with anything else requiring a spot market booking, said Carlos Fuchs, director of freight forwarding firm Royal Cargo.

“The normal peak season is from September or October to January, but this year we are having our biggest volume in May, which is normally not a good month,” Fuchs said.

Brazilian economic support

A Brazilian government program to counter economic harm during the coronavirus pandemic provided low-income segments of the population with monthly payments, boosting demand for consumer goods made in China, said Fabrizio De Paulis, managing director at De Paulis Logistics in Brazil.

With import demand expected to remain strong in the months ahead, and an already-sizable backlog of cargoes coming from Asian factories, the GRIs and surcharges nominated for June shipments to South America indicate that the upward trend for rates will continue, De Paulis said.

“The situation for shipments from China to Brazil is much worse now with no space on ships available and cargoes constantly being rolled,” De Paulis said. “The market looks like it can continue this way with imports from China increasing from the start of the second quarter through the end of the year.”

 

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G7 to step up efforts to advance commercial scale hydrogen

By Joanna Sampsonon May 24, 2021

 

The Group of Seven (G7) has agreed to step up efforts to advance commercial scale hydrogen from low carbon and renewable sources across its economies, including support for fuel cell deployment globally.

The intergovernmental organisation, consisting of Canada, France, Germany, Italy, Japan, the UK and the US, met virtually on Friday (May 21), ahead of the G7 leaders’ Summit in Cornwall, UK next month, and agreed to phase out government funding for fossil fuel projects internationally in support of greener alternatives, like hydrogen.

As a first step the G7 countries will end all new finance for coal power by the end of 2021, matched by increased support for clean energy alternatives.

It was also agreed to accelerate the transition away from unabated coal capacity and to an overwhelmingly decarbonised power system in the 2030s.

“This event, which is a major stepping stone before we host the leaders G7 in Cornwall next month, has been dedicated to accelerating action within the G7 to tackle the twin challenges of climate change, and biodiversity loss, and we have seen substantial progress this week, notably on one of my personal priorities: ending coal,” said Alok Sharma, COP President-Designate.

“The G7 are united on the need to build back greener for the pandemic by putting climate, biodiversity and the environment at the heart of the worldwide Covid-19 recovery strategies and investments, and we are all committed to limiting global warming and keeping 1.5 degrees alive.

“I am proud that we are the first net zero G7, and to deliver on this we have all agreed to accelerate the transition away from dirty coal capacity to an overwhelmingly decarbonized power system in the 2030s.

“We’re also committed to phasing out international fossil fuel finance, beginning with an end to all new direct government support for international coal power by the end of 2021. This commitment I believe sends a clear signal to the world that coal is on the way out.

“On finance, the G7 has reaffirmed the goal to jointly mobilise $100bn annually through to 2025, agreeing to increase climate finance and funds directed towards projects protecting vulnerable people who are already feeling the effects of climate change.”

Commitment to hydrogen

Recognising the importance of maintaining energy security as the global energy systems are transformed, and the need for energy markets that are “open, flexible, transparent, competitive, sustainable, reliable and resilient”, the G7 committed to developing strategies and actions that “enhance our focus on the security of innovative, clean, safe and sustainable energy technologies”.

“This includes resilience in the face of cyber security threats, the system integration of variable renewable energy, energy storage, flexible power plants, hydrogen, as well as demand side management, smart grids, and related infrastructure including the accommodation of sustainable biofuels and hydrogen,” the G7 said in a statement Friday.

“We recognise that natural gas may still be needed during the clean energy transition on a time-limited basis and we will work to abate related emissions towards overwhelmingly decarbonised power systems in the 2030s.”

The G7 also recognised the need to accelerate innovation this decade to meet its net zero goal by 2050 or sooner.

This includes scaling up demonstrations and the early deployment of zero and negative carbon technologies, like hydrogen.

“We recognise the importance of early action to decarbonise hard-to-abate industrial sectors such as iron and steel, cement, chemicals, and petrochemicals, to ensure that emissions across the entire economy reach net zero by 2050,” the G7 statement said.

“For these hard-to-abate sectors to achieve this, we commit to targeting greater levels of innovation funding to lower the costs of industrial decarbonisation technologies, including the use of hydrogen, electrification, sustainable biomass, CCUS and synthetic fuels (including ammonia and fuels made from hydrogen).”

It added, “We recognise the importance of renewable and low carbon hydrogen on the pathway to net zero.

“We will step up efforts to advance commercial scale hydrogen from low carbon and renewable sources across our economies, including support for fuel cell deployment globally.

“This will help realise the development of a future international hydrogen market that creates new jobs for current and future workers in the energy sector.”

I have attached an article from Protecht- The Digitisation of Risk Management and thank you to the Governance Institute of Australia, an article from our friends at Ashurst and a look at Inflation from the team at AMP Capital.

Inflation - Should we be worried?

 

The Digitisation of Risk Management

 

Hydrogen For Industry Waste

 

I hope you enjoy their articles in this week’ read.

If you have any questions on how to trade the fixed interest and equity markets, please feel free to contact me

Regards