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Golar LNG(GLNG - Get Report) recently had to retrofit three-decade old vessels to meet demand for its natural gas shipping services.
Golar is another case of where investors can bet on the long-term secular trend: If the U.S. natural gas export market takes off that could be a huge driver for the LNG shipping companies.
There is an important caveat here: the shipping sector does tend to attract a lot of hot money, and investors often chase short-term trends in the market, such as an increase in day rates and exogenous events that throw expected supply and demand out of balance.
That has happened in Golar's market, where day rates have more than doubled since the beginning of 2011 and Japan's need for increased natural gas imports in the wake of the Fukushima disaster created an unexpected opportunity.
Previous to the January move to retrofit 35 year-old vessels because demand was higher than expected, Golar and its peers had been laying up ships. That's still the case for dry bulk shippers, many of which have just started to rally from the 52-week lows at which they started 2012, while Golar tested new highs.
Golar has been on such a nice run that investors recently took some profits, and shares are flat year-to-date.
There is still some upside potential in day rates, but ultimately there will be a new ship building cycle in 2013 and 2014 and that could bring an end to the trend.
Golar doesn't have the opportunity to increase its ship capacity in the near-term -- unless through acquisition. That's why an increase natural gas export market from the U.S. could be a wildcard in keeping the LNG shipping sector trade from rolling over.