Page 11 - MUMBAI - 02 MAY 2024

EXIM 11

INDIA newsletter Mumbai, Thursday, May 2, 2024
Impact of hostilities on the Strait of

Hormuz and the LNG trade

Exim News Service imports from Qatar every year, demand remains stable in Europe
LONDON, May 1 respectively (based on the 2023 and Asia.
THE recent Iran-Israel hostili- trade statistics). However, the situation could
ties have escalated the tensions in Meanwhile, European importers deteriorate if the closure extends to
the Middle East and raised concerns including the UK, Italy and Belgium several weeks or months, stalling
over LNG trade through the Strait of will also need to source LNG from about 5-6 million tonnes of supply
Hormuz (SoH), a key and only feasible other countries, if supply from Qatar per month from Qatar and the UAE.
passage for Qatar and the UAE to becomes impassable. In terms of LNGC loadings, about
export LNG. Any further escalation, We believe that a complete closure 16-17 LNGCs will be idled if supply
leading to the closure of the SoH could of the Strait of Hormuz is highly is halted for a week, while 60-70
impact LNG shipping as 21% of the unlikely as Iran exports all of its oil LNGC loadings will be affected in
global LNG supply could be affected, and LPG cargoes through it and other a month.
says Drewry in an analysis. Middle Eastern countries traversing LNG shipping could reap in the
It elaborates: via SoH will have severe repercus- benefits of short/partial closure
The Strait of Hormuz is a vital sions if it is blocked. Meanwhile, of the SoH: So far, LNGC spot rates
strategic passage for the Middle East, the global economy will be hit by have not shown any reaction to the
supporting its international trade and a massive supply deficit of natural escalated situation. Rates have con-
regional integration. The artery is resources as 30% of oil, 20% of LNG tinued to slide since the beginning of
significant for the LNG sector as two and 40% of LPG will be affected by this month due to tepid demand, mild
key LNG exporters – Qatar and UAE the potential closure. However, this weather and ample inventories.
- export their LNG shipments via the will have short-term repercussions We believe the partial closure of
SoH with no other possible alterna- on LNG. the SoH could support LNG ship-
tive available. Thus, any action by Iran-Israel conflict: Impact on ping amid vessels diverting away
Iran, leading to the closure will have LNG market and shipping from the Middle East in search of
significant implications for the LNG LNG prices spike: Asian Spot new employment as importers will
market. However, the extent of the and TTF were up 14% and 15% WoW, seek substituted cargoes from other
impact will differ and depend on the respectively, on 20 April 2024 amid destinations, leading to some shifts
duration of the closure. the escalated tensions in the Middle in current trade patterns. Although
In 2023, Qatar exported about 81 East. Prices are now more than $10 the shift in trade will be sustainable
million tonnes of LNG and the UAE per MMBtu, after hovering below for a short period (assuming up to
exported 4 million tonnes, contribut- this level for the last three months. five months), we expect an increased
ing 21% to the global supply. Any sup- We expect LNG prices to be volatile US-Asia trade, providing impetus to
ply blockage will not only hurt export- in tandem with prolonged conflict in LNG shipping rates – mainly due
ers of these two countries but will also the Middle East, threatening supply to huge vessel absorption as US
compel key importers to scout for new cuts, which will keep LNG players shipments will continue to take the
sources. Between Asia and Europe, on the edge. COGH instead of the Panama and
the former will have a much greater We also expect Asian spot to Suez Canals, generating extra tonne-
impact as 70% of Qatar’s volumes are maintain its premium over TTF as mile demand.
exported to Asia while 20% to Europe. any supply cut from the Middle East Thus, short-term supply disrup-
Some countries, such as India will impact Asian buyers more than tion will lead to demand alternation,
and China, will be at high risk European ones. However, the growth supporting LNG shipping and aiding
as these countries source about in LNG prices will be moderate due to LNG prices.
45% and 25% of their total LNG high storage and stable gas demand However, we are pessimistic
in Europe. about LNG shipping if the complete
The extent of supply shortage
Cotton exports soar 137 pc will depend on the duration of closure of the SoH extends for a lon-
Exim News Service SoH closure: According to Drewry ger period (assuming one year). Any
supply shortage for a long duration
NEW DELHI, May 1 AIS, Qatar exports about 0.2 mil- will harm LNG shipping, further
COTTON exports during October- lion tonnes of LNG per day, while tightening the market. On the other
March were up 137 per cent at 18 lakh the UAE exports nearly 10 thousand hand, fleet availability will grow with
bales compared to the 7.59 lakh bales tonnes per day. We believe the impact several vessels being idled due to
logged in the same period last year, of any supply disruption from these LNG supply shortage while about 60
as per the latest estimates released countries will be directly proportional new LNGCs are expected to join the
by the Cotton Association of India to the duration of the closure. If Iran current fleet this year. Consequently,
(CAI), the apex trade body. India had blocks SoH for a few days or weeks, we this will lead to vessel oversupply,
exported 15.59 lakh bales during the expect no major impact on the LNG which inevitably will dent the LNG
2022-23 season. This sharp spike dur- market and shipping, as currently, shipping rates.
ing the first half of the current season
is particularly notable when compared Navy ships deployed to protect international
to India’s total cotton exports of 15.59 shipping routes: Jaishankar
lakh bales for the entire 2022-23 sea-
son that ended in September 2023. Exim News Service trade costs down. This endeavour
The massive 137 per cent year-over- NEW DELHI, May 1 has enhanced India’s stature in the
year increase in exports from October TWENTY-ONE Indian Navy ships world, he added. EAM Jaishankar
2023 to March 2024 can be attributed have been deployed to secure the also highlighted India’s economic
to several factors, according to trade shipping routes amid Houthi attacks growth and its ongoing journey to
experts. Indian cotton prices remained in the Red Sea, said External Affairs become the third largest economy
very competitive on the global market Minister Mr S. Jaishankar during an in the world, emphasising that the
for a large portion of this period, mak- interactive session here this week. decisions India makes at home are
ing it an attractive option for overseas The vessels are protecting the inter- keenly watched around the globe, as
buyers, said a report. national shipping routes and keeping per a report.