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Atlantic Basin Clean - TC2

Following the massive hype on Tuesday caused by the news of the Colonial Pipeline explosion, the sentiment quickly turned which led to a number of ships being failed. As the day progressed yesterday, the situation was to a great extent mirrored in the U.S. Gulf.  The market clearly needs to be tested, but we would put TC2 at WS 120 max and softening.

BITR TC2 – NOV. 02: 131.50 (-24.50)

: From Southport Maritime


Tankers and pipelines and markets and $STNG

The tragic accident and repair on the Colonial Pipeline in Alabama was marked by the whip in $STNG yesterday and today. Medium-range tanker charter rates from Rotterdam to New York spiked by 266% yesterday according to Gibson Shipbrokers. Mike has drawn attention to those Atlantic Basin rates should repairs run longer.
Think about that for a second. A critical gasoline pipeline is damaged in a maintenance accident that sadly took one life and horribly injured several other workers. The infrastructure ripple effect caused gasoline shortages in North Carolina and spikes in tanker charter rates, all derived from gasoline thirst and the reported piercing of the pipeline by a single excavator. One earthmoving machine.
As our friend and commentator David Chinski mentioned, “If one pilot over the South China Sea does the wrong thing…..” 
Also, let’s not forget the “interesting times” quote, possibly originating in China, and from British politician Joseph Chamberlain in 1898: “I think that you will all agree that we are living in most interesting times. I never remember myself a time in which our history was so full, in which day by day brought us new objects of interest, and, let me say also, new objects for anxiety.” 

Atlantic Basin Clean - The Day After

With news that the Colonial pipeline will be repaired fairly soon - clean markets have cooled down since yesterday’s spike.  Many ships that were “sub-fixed”, meaning - final confirmation was still needed - have failed.  

Rates are haard to peg when these wild swings happen - but in Worldscale terms, TC2 dropped from 150 yesterday to 130 today - with the November FFA dropping from 120 to 112 in the same time frame.

The key, of course, is to see if the repairs actually get done by Saturday. If the repairs require much more time beyond that - rates will turn up again.


Atlantic Basin Clean Markets

With news of a fire at the Colonial Pipeline - clean rates spiked significantly (in case you were wondering why STNG shot up today).

With clean products from the USG to the USAC unable to move via pipeline - the natural back up plan would be to ship more of them from Europe into the USAC. Rates on the TC2 route shot from WS 87 to WS 150 - which adds roughly $1/bbl to the delivered cost.  Viewed in terms of what that means to Owners - their TCE jumped from $5k/day to $18k/day.  That said - there is talk that the pipeline will be repaired in short order - implying rates will come down pretty quickly.  If, however, the pipeline doesn’t get repaired within a week or so, Owners smell blood and will hold out for the high rates seen today - maybe higher.

Worth noting is that the USG export market should also benefit from this - since product that would normally be moved via pipeline will likely be moved on ocean going tonnage - either Jones Act or international flag - implying the TC14 market could move up as well.


$DHT - DHT Holdings

2016-10-26 3:43 PM      
About a month ago, we had some bearish concerns on DHT. However, our 
number to watch for downward direction (4.00) wasn’t broken through.  
A slow consolidation of 4.00 support has shown up instead. Dare we say  
we’re watching for a return to the 4.75 area? That would confirm the present trend 
but DHT, as with so many other shipping stocks, is taking baby steps. Caution still rules.

Previous pontifications on DHT Holdings:

2016-09-25 6:54 PM     
Tip-toeing along just above 4.00, DHT is giving us some bearish concern. 
Cautious optimism is fading a little; a break down through 4.00 will have us
staring at 3.75 again for continuance of the general bearishness.
2016-09-20 1:03 PM     
Continued weakness that overshadows half-hearted price recoveries 
has plagued DHT for most of 2016. Maybe the down-trend is finally 
easing on recent signals. A cautiously-estimated price target of 4.50 - 4.75
could be in the works, but optimism isn’t proven yet. 3.75 is to be watched for
any continuation downwards.  


LNG - Greg Lewis

Greg has released a positive note on the LNG sector today.  Highlights - 

Rising Tide. The CS Global Energy Team expects LNG production to grow 12%/year over the next two years and average 8% annually over the next five years. Strong near term LNG production growth should see…

Spring Tide. LNG spot rates are back in the mid/high $30k/d range with breakeven economics back in play. Rates are well off the lows…

Flood Tide. The MLP market is righting its ship…

All Aboard. Golar remains our top pick in LNG shipping owing to its LNG spot exposure (90% of conventional fleet) and its ongoing transformation…


Erik at Arctic on Ton Miles

Tankers: China continues to build ton-miles as Atlantic imports push higher – Chinese crude oil imports hit 8.1mbblspd in Sep-16, but from a tanker perspective a deeper dive in the sourcing of its imports reveal another supportive trend to a tanker market which is ‘written off’ until Q3/17 (once the seasonal trade dissipates). Imports from the Atlantic made up 2.1mbblspd in Sep-16 compared to 1.3mbblspd in 2015 – 60% increase. Angolan crudes were the main preference (1mbblspd), driven by both teapots preference for West African Lights as well as ‘crude-for-loans’ where Angola now delivers an equivalent of 5.4 VLCC cargoes per month to China. As we have previously highlighted, Brazilian crudes to China are also racing higher with Sep volumes at 0.5kbblspd - now on par with Venezuelan crudes who also have benefitted from ‘Chinese petrodollars’. The irony of crude-for-loan is the fact that the burden (for the likes of Angola and Venezuela) in volume is heavier in a low oil price environment which will continue to drive ton-miles higher. Despite being humble to the orderbook, we continue to see the sentiment towards crude tankers as too pessimistic.


Noah Parquette at JPM on Tankers Ton Miles to China

While volumes rose only 0.6% from a August, ton-miles surged 6.4% to reach a new record high as Atlantic basin sources also reached a new record of 9.8 million tons (30% of imports), and pulled up the average distance to just under 6,700 nautical miles. Angola and Venezuela were significant sources, but there was a major increase in oil imports coming from Brazil. Outside of the Atlantic, Russia and Saudi Arabia were about even in terms of the top source, both just under 4 million tons. While volumes rose only 0.6% from a August, ton-miles surged 6.4% to reach a newrecord high as Atlantic basin sources also reached a new record of 9.8 million tons(30% of  imports), and pulled up the average distance to just under 6,700 nauticalmiles. Angola and Venezuela were significant sources, but there was a majorincrease in oil imports coming from Brazil. Outside of the Atlantic, Russia and SaudiArabia were about even in terms of the top source, both just under 4 million tons.
Ton Mile Trader comment:  it appears that the average haul into China was roughly 6700 miles , which is above average and towards the higher end of the data for the last two years. Total tons was also approaching an all time high - 33.1m tons.  So if average haul and total tons are on the upper end of their ranges - I would have expected rates to be higher than they are. Could be a combination of fleet growth and reduced port delays.  Just a thought.

Dry Bulk

Capes drop further to about $8,000/day.  With Nov/Dec priced at 770 as per FIS curve - what you see is what you get.  

Jonathan Chappell at Evercore issued a note today on dry bulk, “Dont bite on head fakes”. His last paragraph begins, “Survival remains the top priority for now.”


$SEA - Guggenheim Shipping ETF

2016-10-24 2:38 PM EST
The long wander of SEA around that 11.50 mark continues. Technically, there could be another wander downwards which would maintain the current range seen recently. A look through the list of SEA’s component stocks may give the impression that this range-wandering could continue, given the surges and fades spread amongst their respective industry fortunes.