Jonathan Chappell on Tanker Asset Values

Jonathan Chappell at Evercore has released a note showing that using historical tanker prices - and allowing for inflation - today we see prices sitting on a “floor”. Looking at more than 25 years of data for Vs and MRs - you can buy either today at roughly the same real dollar price as you could in the late 80s. 

Newbuild Vs (Korea-Japan built) are being priced in the $80 millions and MRs in the mid/low $30 millions.

The yards are starved for business and have ample capacity - with the problem being that lending has dried up to all but the highest rated shipping names. So, from a technical trading standpoint, for Owners with access to capital - now might be a good time to start buying.

There are a few flys in the ointment of simple advice to “buy” solely because prices have a hit a possible floor. The primary issue, to me, being the fleet is still very young.  An extended period of low rates will not bring about the necessary level of scrapping for the tanker market to undergo it’s usual self correcting cycle.


Omar Nokta on Dry Bulk

Omar Nokta at Clarksons Platou released a note yesterday - pointing to some positive developments on dry bulk. Bullet points as follows:

- steel production rising following horrendous start to 2016
- Chinese iron ore imports up 9% so far this year
- coal trade resuming into China with imports up 4.5%
- questions remain on lengevity of run, has lasted 4+ months so far 


Dry Bulk

BCI $6059 (DOWN 261)
BPI $6276 (DOWN 174)
BSI $7219 (DOWN 68)
BHSI $5678 (UP 48)
More downward pressure on the larger ships.  Too much supply, not enough demand.



Dry Bulk and Tankers

All told not much to report.  I have had a busy weekend - and Monday - preparing for my trip to CT tomorrow. Posting will be a but spotty for the next week - but - markets are currently a bit mundane anyway.

Tankers - we did see TD3 physical drop two points to roughly ws40 - as a market cargo on the AG/East was reported to have received 10 offers.  That is a bad sign for rates.  Elsewhere - much of the same.

Dry Bulk - the Cape and Pmax classes lost another 150-200 each- with no signs of a pending return to the upside.  Smaller ships remain within +/- 50 of Friday’s figures.

I plan to post each day - and of course if we see action - we will report.  But for now - enjoy your summer.


Tanker Market

Not much to report - though we are seeing rates for TC14 (diesel from USG to Europe or wherever) take a kick to the groin.  Too many ships and not enough cargo has dropped rates to ws61.  Ouch, indeed!  Rates for gasoline from Europe to the US (or wherever) are also a tad miserable. The route is known as TC2 - and after a mini surge late last week - rates have returned to stall mode - roughly ws100.

“Aw - Ms Crabtree - you can call me Chubbsy Ubbsy”

Ton Mile Teaching Moment:  Generally speaking, Europe prefers deisel and the US prefers gasoline - so we tend to export diesel their way (from the USG) and they tend to export gasoline to the USAC.  Diesel is also known as distillate - and comes with various levels of sulfur - ULSD, for example is Ultra Low Sulfur Diesel.  Gasoline is known in various forms as mogas (motor gas) and UMS (unleaded motor spirits).  The reference to any refined product that is no longer dirty and is a far cry from its original crude form is known as CPP - or Clean Petroleum Product.  It is moved on Product Tankers - or “Clean MRs”.  Crude and “refined but still dirty products” is known as DPP - Dirty Petroleum Product.


Dry Bulk

Cape and Pmax class lose $150-200 or so each in a dull and soft market.  Smaller classes within $50 of either goal post - so nothing to report there either.

If you are looking for dry bulk to turn north, today is not that day. Tomorrow will not be that day either. We all know that anything is possible in bulk shipping - but the issue with dry bulk is structural and cyclical.  Train wreck.  As Jonathan Chappell aplty mentioned, “Don’t shoot until you see the white of the eyes.”


Jonathan Chappell - Evercore - Q2 Preview Dry Bulk

We have also received a note on dry bulk from Jonathan “Gladiator” Chappell.  With dry bulk neck deep in the abyss, JC titles his piece, “Dry Bulk:  Better late than early”. Sub title: “Worst is likely over, but still too soon for bottom fishing.”


- demand is surprising to the upside…
- …at the same time as the necessary supply response begins to slow
- there is a reason ship owners own yachts and we don’t
- wait until you see the whites of the eyes…and fade the rallies in the meantime

DSX Sell $1.50 ($1)
NMM Hold $1.50
SALT Hold $4 ($6)
SB Sell no target 


Jonathan Chappell at Evercore - Q2 Tanker Preview

The pride of Binghamton has released his Q2 tanker preview. The primary title is, “Rate softness escalates fear, creates opportunity.”  It subtitled, “Lowering estimates, but stocks still attractive.” While his price targets have been lowered - he still sees upside with certain names.  His three main bullet points:

- demand becoming more complicated to measure and represents greater near term risk
- capacity growth not a surprise…or is it?
- the stocks: Product > Crude into yearend 
The ratings:
ASC Buy $11 ($15)
CPLP Hold $4
DHT Buy $8 ($10)
EURN Buy $14 ($17)
FRO Hold $9 ($11)
GNRT $10 ($12)
NAT Hold $13 ($13.5)
NNA Buy $2 ($2.50)
STNG Buy $8 ($9.5)
TNK Buy $5 ($6)
TNP Buy $7 ($8)

Robert Perri at Axia Capital Markets - Tankers and Dry 

Robert Perri has updated his tanker sector this past Tuesday.  Here are the ratings - and we have added his dry thoughts from early July also.

EURN:  Buy $14.50, “Recent sell off is overblown”
TNP: Buy $10.50, “Share price to improve as LNG uncertainty subsides”
NNA: Buy $4.25, “Shares under pressure due to concerns over NM”
GNRT: Buy $11.75, “…the best positioned name for upside in our universe”

SALT: Neutral (7/5/2016), “Recent equity offering puts company on solid ground”
SBLK: Neutral (7/5/2016), “Slow going with its lenders…” 


Court Smith's Insight on Valdez Exports

Court Smith at MJLF highlighted Valdez exports in his daily note. He mentions that a Teekay suezmax will load a cargo from Valdez - only the third export cargo from Alaska in ten years. This cargo shipment is more of a sidenote and an “interesting” topic of conversation than anything that moves the dial.  He notes that Alaskan production is in structural decline - but sees potential meaning with his last two sentences, “One interesting factor that could encourage further ANS exports is the notional discount for it relative to ESPO, the competing Russian grade of crude.  For now, Alaska exports will likely remain few and far between.”

ANS = Alaskan North Slope (crude)
ESPO = Eastern Siberian - Pacific Ocean (pipeline)