In Hellenic Shipping News 08/05/2015
Shipbrokers see a prolonged and sustainable tanker market rally ahead, hot on the heels of a market which has already exceeded expectations so far in the four months of the year which have gone by. In its latest weekly report, shipbroker Allied Shipbroking noted that large crude oil tankers are holding their ground and while the year-to-date performance has been stellar and way above anything we would have expected 12 months ago, it seems as though things may get even better.
According to Mr. George Lazaridis, Head of Market Research & Asset Valuations with Allied Shipbroking, “as we enter into the US driving season and despite having just seen reports of a pessimistic U.S. economic growth for the first quarter, we might just be primed for another strong rally in tanker freight rates. Demand for energy continues to surge and it seems as though the low prices have boosted demand beyond most expectations. This boost has been met by a sudden increase in imports by the U.S., an economy that has always played a major role for tankers, but one that has also failed to provide the m with much needed support recently due to its own tight oil “revolution”, he noted.
However, there is something that is still causing jitters across most investors, no matter if their interest is on shipping assets or not. Lazaridis said that “the big news last week was the announcement regarding the performance of the U.S. economy for the 1Q2015. The message however was not as clear as some claimed. For one, you had a combined drop in GDP growth and a slowdown in both manufacturing and consumer spending. There were several factors to all this and looking at them in more detail things might not be as worrisome as they may sound. On the one hand the harsh weather surely played a role as to the lower consumer spending during a period which is also seasonally slower. West Coast port disputes added to this, with disruptions caus-ing gaps in inventories for both manufacturers and retailers. The stronger dollar also led to eroding of overseas profits for U.S. multinationals, while it also brought about a decrease in competitiveness of U.S. products abroad. As a final hit you also had the overall slowdown noted overseas which likely proved to be a major factor for both U.S. business abroad and at home”, Allied’s analyst said.
He went on to mention that “yet for one this slower growth rate is not too dissimilar to the slow start we noted in 2014. Despite having a negative 1Q2014, the U.S. economy closed the year with a very strong GDP growth rate. On the other hand even through the slowdown in 1Q2015, the reported unemployment rate has dropped to its lowest level since late 2008.
So with all this being taken into account, it seems that the average year-to-date TCE of US$ 41,509/day for VLCCs could easily climb to much higher levels beyond anything we have seen over the past 5 years, with similar optimism also held for Suezmaxes and Aframaxes as well. At the same time the orderbook is still held at fairly low levels de-spite the number of switches being made from dry bulk to tanker orders and the place-ment of new contracts that have taken place during the past 6 months. This means that we still hold fairly good on the supply side of things”.
However, even with this, Lazaridis said that “many still pause when it comes to the long term approach of the crude oil tanker market. There is still plenty that could upset things in the long-run, while these high rates could easily be eroded as shipbuilding capacity at the moment is more the adequate to be an equalizer to the slow pace growth expected for crude oil trade within the next three to five years, and this is only under the condition that oil producers such as Saudi Arabia continue to swamp the market with cheap oil, cause if that where to reverse things could turn ugly and quite quickly”, he concluded.
