Russia-Origin Supply Disruption Brings Windfall to Natural Gas Stocks

US Natural Gas Futures Hit 14-Year High
Expectations for European LNG Carrier Orders
Domestic Shipbuilding and Steel Emerging as Beneficiaries
Natural Gas ETNs Also Attracting Investment Attention

[Asia Economy Reporter Kwon Jaehee] As Russia temporarily halts gas supplies to Germany for three days starting today, natural gas-related stocks are once again drawing attention. Although the official reason given is pipeline maintenance, the prevailing interpretation is that this is a retaliatory measure against the European Union (EU). There are even forecasts that Russia might completely cut off gas supplies, turning this into an opportunity. Consequently, demand for U.S.-produced natural gas is being highlighted, bringing related stocks into focus.

According to the New York Mercantile Exchange (NYMEX) on the 30th (local time), the price of U.S. natural gas futures was recorded at $9.150 per MMBTU (a unit of natural gas volume). This is the highest level in the past 14 years. The EU, which heavily depends on Russian natural gas, imposed sanctions on Russia due to the Russia-Ukraine war, prompting Russia to reduce natural gas supply as a retaliatory measure. As a result, U.S. natural gas prices surged due to this ripple effect.

As demand for U.S. natural gas increases, South Korean shipbuilding and steel pipe companies are also enjoying indirect benefits. To import U.S. natural gas into Europe, LNG carriers are essential, and South Korean shipbuilders’ LNG carrier technology and reliability are highly regarded internationally. Representative companies include Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering, Hyundai Heavy Industries, and Korea Shipbuilding & Offshore Engineering. Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering have risen nearly 10% since the beginning of the year. Korea Shipbuilding & Offshore Engineering has increased by more than 20% since the start of the year. During the same period, Hyundai Heavy Industries rose by nearly 50%.

Steel pipe manufacturer SeAH Steel Holdings has also emerged as a beneficiary stock. SeAH Steel Holdings surged by more than 110% compared to the beginning of the year. Its main product line is steel pipes, which are primarily used in plants or pipelines for oil and natural gas.

Natural gas ETNs are also attracting attention as investment options. The Shinhan Leverage Natural Gas Futures ETN and Samsung Leverage Natural Gas Futures ETN have surged by as much as 400% since the beginning of the year, while the TRUE Leverage Natural Gas ETN recorded a 340% increase during the same period. These products are leveraged instruments that track twice the returns of natural gas futures derivatives.

Byun Junho, a researcher at IBK Investment & Securities, analyzed, "Since July, the suspension of gas supplies by Russia has caused natural gas prices to surge sharply in a short period. It seems unlikely that relations between Russia and Europe will improve in the short term, and with heating demand approaching in winter, natural gas prices are expected to rise further."