UK’s South Hook to get first non-Qatari LNG tanker

High freight rates are weighing on Asian demand, with deliveries of LNG heading to northwest Europe instead. (Shutterstock)
Updated 26 October 2018
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UK’s South Hook to get first non-Qatari LNG tanker

  • Commodities trader Vitol said it would import LNG in the Yari tanker into South Hook on Oct. 31
  • South Hook has been upgraded so it can receive LNG that is not just from Qatar

LONDON: Britain’s South Hook liquefied natural gas (LNG) terminal is scheduled to receive its first tanker of LNG not supplied by Qatar at the end of this month.
Commodities trader Vitol said it would import LNG in the Yari tanker into South Hook on Oct. 31. The tanker is coming from the Sabine Pass LNG terminal in the US.
The South Hook LNG Terminal, located in Milford Haven in west Wales, has received LNG from Qatar since it became operational in 2010, where it is regasified and delivered into the gas grid. It can provide around 20 percent of Britain’s natural gas needs.
Qatar is the leading LNG exporter to Britain but it has also found new demand from countries such as Pakistan, Poland and Turkey.
South Hook has been upgraded so it can receive LNG that is not just from Qatar. The shareholders in the South Hook LNG Terminal Company are Qatar Petroleum, Exxon Mobil Corporation and Total.
South Hook Gas is responsible for managing the terminal’s import capacity.
Elsewhere, Asian spot prices for liquefied natural gas fell to a more than two-month low this week amid increased supply and lower demand especially in Japan, which is expecting a warmer-than-usual winter and the restart of nuclear reactors.
High freight rates are also weighing on Asian demand, with deliveries of LNG heading to northwest Europe instead.
December spot LNG fell to the lowest since Aug. 10.
Illustrating the tepid demand, a fleet of half-a-dozen tankers carrying unsold LNG has been floating in Singapore and Malaysian waters for up to two weeks, traders said this week.
The ships are carrying a total of around 1 million cubic meters of LNG, worth more than $200 million at current spot market prices.
The LNG cargoes were purchased ahead of the northern hemisphere winter season in a strategic move but are now
failing to find buyers, several traders told Reuters.


UAE banks benefit from US Fed rate rises

Updated 44 min 42 sec ago
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UAE banks benefit from US Fed rate rises

  • With the dirham pegged to the US dollar, the actions of the US central bank have a direct impact on interest rates charged by UAE banks
  • With another Fed rate hike potentially on the horizon in December, analysts said the Gulf country’s banks could find it harder to keep ramping up the cost of borrowing

LONDON: Banks in the UAE are reaping the benefits of the US Federal Reserve’s three rate rises so far this year, with healthy increases in net interest incomes helping bolster profits.
With the dirham pegged to the US dollar, the actions of the US central bank have a direct impact on interest rates charged by UAE banks.
The UAE Central Bank last increased its repo rate by 25 basis points and raised interest rates on certificates of deposit on Sept. 26 to bring it in line with the Fed’s earlier move.
With another Fed rate hike potentially on the horizon in December, analysts said the Gulf country’s banks could find it harder to keep ramping up the cost of borrowing for their corporates or individual clients.
“Due to ample liquidity in the system, supported by high crude prices, banks are struggling to pass the rate hikes to customers,” said Chiradeep Ghosh, research analyst at Sico Bank in Bahrain.

 

 “We expect UAE banks to report only a modest (net interest margin) expansion, despite a likely three to four more Fed rate hikes by the end of 2019.”
In the last reported quarter, UAE banks revealed increases in net interest income of varying degrees.
Banks’ profitability is typically driven by net interest income, which accounted for 69 percent of the UAE sector’s total net revenue in 2017, according to a Oct. 3 Moody’s Investors Services report.
Dubai-headquartered Emirates NBD reported one of the largest increases in interest income this year.
The bank posted net profits of 7.7 billion dirhams ($2.1 billion) for first nine months of the year, 24 percent up year-on-year. This increase was supported by 9.5 billion dirhams in net interest income, a 19 percent increase on the previous year. In contrast, non-interest income dropped 2 percent for the same time period.
First Abu Dhabi Bank (FAB) reported smaller increases, with net interest income reaching 9.75 billion dirhams for the first nine months of the year, marginally up by 0.1 percent.
The increase was slightly more noticeable in the third quarter alone, jumping by 1.2 percent compared to Q3 last year, according to its Oct. 23 statement.
FAB said net interest income was “broadly stable” due to “strong business volumes and rate hike benefits,” according to a bank presentation.
Dubai-based Mashreq Bank said its net interest income, combined with Islamic financing income, climbed by 4.5 percent in the first nine months year-on-year to reach 2.8 billion dirhams, according to a Oct. 21 filing.
Analysts said the increase in the banks’ interest-related income has helped to counter some of the risk of rising funding costs looming over banks.
“We expect that rising interest rates will increase system-wide net interest margins as banks’ higher gross yields outweigh the increase in funding costs,” Moody’s said.
Continued rate hikes could, however, start to affect the financing costs for corporate and individual borrowers and be a drag on economic growth, analysts said.
“Rate hikes would definitely dent the borrowing appetite of UAE corporations and the banks would not be left with much option but to lower their spread over interbank rate which they charge corporates,” said Ghosh.
“The capacity of UAE companies to bear higher debt burden would eventually depend on the economic activities in the UAE. A weak economic environment, along with a surge in higher funding cost may lead to pick up in delinquencies,” he said.
Ehsan Khoman, head of regional research and strategy at MUFG, based in Dubai, said the country should be able to absorb the impact of higher interest rates for now.
“Rising interest rates are unlikely to derail the UAE’s benign economic growth outlook in the near-term. The impact of higher rates should be more than offset by government stimulus. Having said that, it’s an additional factor to consider that GDP growth will remain weak by historical standards,” he said.
Some UAE companies have already reported higher financing costs in their latest Q3 results.
The UAE-based United Food Company (UFC) said on Nov. 5 that finance costs paid in the first nine months of the year reached 535,742 dirhams, compared to the lower amount of 364,568 dirhams recorded in the same period in 2017.
Dubai Investments said on Nov. 5 that finance expenses for the first nine months of the year reached 133.6 million dirhams compared to 69.4 million dirhams.

FACTOID

BACKGROUND

The US Federal Reserve has hiked interest rates three times this year. It left rates unchanged in November but is likely to make another hike next month.