Hong Kong Stock Concept Tracking | Red Sea Crisis Affects Global Supply Chain, Multiple Airlines Suspend Flights and Push up International Gas Prices, Highlighting the Value of Natural Gas Asset Allocation (with Concept Stocks)

Zhitong App learned that in recent days, several ships have been attacked by Houthi militants in the Red Sea, leading to major international shipping companies announcing the suspension of navigation in the Red Sea. This has caused concerns that the war between Israel and Hamas may affect the important routes for natural gas transportation.

The Houthi militants claimed responsibility for the recent attacks on ships crossing the Red Sea. This area is one of the world's most important channels for energy product transportation. BP's decision also highlights the challenges of maintaining security in the Red Sea. Norwegian energy giant Equinor ASA also issued a similar announcement a few hours later.

Liquefied natural gas tankers usually travel between the Middle East and Europe via the Red Sea and the Suez Canal. Although there is no physical shortage of liquefied natural gas supply, traders have been concerned about potential supply disruptions in recent months. If liquefied natural gas carriers are forced to use longer routes (i.e., via the Cape of Good Hope in Africa), both the time and cost of the journey will increase.

As a result, international natural gas prices have risen sharply, with European natural gas prices experiencing the largest increase in two months. ICE UK natural gas prices have increased by more than 8%, and the European benchmark, Dutch near-month natural gas futures prices, have risen by 13% at one point. This indicates that the European natural gas market is still highly susceptible to the risk of supply disruptions, despite the easing of the energy crisis in Europe.

Analysts believe that the Red Sea is a vital route for transportation via the Suez Canal, and diverting through the Cape of Good Hope will significantly increase transportation costs and extend the journey by 7 to 10 days. If the security crisis in the Red Sea is seen as a threat to shipping in the nearby Arabian Sea, the economic cost will be even greater, as one-third of global maritime oil transportation passes through the Arabian Sea.

According to estimates by S&P Global Platts, for a cargo ship traveling from Rotterdam, the Netherlands to Singapore, if it bypasses the Suez Canal and takes the route via the Cape of Good Hope, the journey will be 40% longer.

Although Europe has filled its natural gas storage facilities and has sufficient imports of liquefied natural gas, the escalation of the Middle East situation may threaten its fragile supply balance. In last year's energy crisis, Russia restricted the flow of pipeline natural gas, and since then, Europe's energy supply system has remained vulnerable.

Analysts say that if more and more shipping companies continue to suspend navigation, it will have a significant impact on the global supply chain. According to a research report by Dongwu Securities, the National Energy Administration released data on the total electricity consumption in November, which reached 763 billion kilowatt-hours, a year-on-year increase of 11.6%, and the monthly growth rate reached a new high for this year.In addition, the Meteorological Bureau has issued a blue warning for cold waves and a yellow warning for blizzards. Starting this week, temperatures will drop significantly in most parts of the country, and there will be significant snowfall in areas such as North China. It is recommended to pay attention to the value of natural gas asset allocation.

Huatai Securities research report stated that the fundamentals of gas companies will continue to improve in 2023, and the pricing mechanism is expected to drive the return of gas sales margin to a reasonable level. The proportion of connection profits affected by real estate will decrease, and capital expenditure will be stable. The "cash cow" attribute will gradually become prominent.

Relevant concept stocks:

ENN ENERGY (02688): Xin'ao announced its operating data for the third quarter, with a slight year-on-year increase of 4% in retail gas volume (excluding power plant gas volume), of which commercial gas sales (excluding power plant gas volume) increased by 5.7% year-on-year, and residential gas sales increased by 3.2% year-on-year.

CHINA RES GAS (01193): Citigroup recently released a research report stating that CHINA RES GAS achieved a 10.4% growth in retail natural gas sales in November. The bank believes that the group can achieve a target of at least 7% growth in retail natural gas sales in 2023. Due to more mergers and acquisitions, the group's retail natural gas sales growth is better than its peers.

CHINA GAS HOLD (00384): CHINA GAS HOLD is one of China's largest cross-regional integrated energy supply and service companies, mainly engaged in investment, construction, and operation of urban and township gas pipeline infrastructure, gas terminals, storage and transportation facilities, and gas logistics systems in China. Looking ahead to the second half of this fiscal year, CITIC Securities pointed out that considering the low probability of accelerated decline in residential connection households, the implementation of the pricing policy for residential gas consumption is continuously advancing, and the upstream terminal gas prices are in a downward trend. It is expected that the performance in FY2024H2 will recover and grow positively.

KUNLUN ENERGY (00135): CITIC Securities research report stated that KUNLUN ENERGY, as a natural gas terminal sales platform under PetroChina and a leading domestic natural gas sales company, has a much higher growth rate in natural gas sales than the industry average. The company integrates multiple advantages such as resources, location, customers, and the entire industry chain. In the future, it is expected to fully benefit from policies such as increased natural gas storage and production and the implementation of pricing adjustments, and the profitability of the natural gas business is expected to further improve, achieving both volume and profit growth.