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Tankers seen having worst year since 1997 on Africa oil slowdown

  • China’s smallest oil imports from west Africa in at least two years are curbing demand for tankers, prolonging the worst rates in more than a decade for Frontline (FRO +1.2%) and other owners, according to a Bloomberg analysis.
  • Tanker owners are enduring a fifth year of declining rates as fleet growth outpaces demand; China's preference for cheaper Middle East oil over west African supplies shortens voyages by 42%, effectively increasing the capacity of the fleet.
  • Daily earnings for VLCCs have plunged 77% to $4,450 this year, according to shipbroker Clarkson; FRO says its ships need $25K/day to break even.
  • Shippers: SFL, NAT, TK, TNK, TOO, TGP.
Comments (4)
  • DeepValueLover
    , contributor
    Comments (8613) | Send Message
     
    FRO is a major deep value.

     

    Take note of the current activity in the Strait of Hormuz and Suez.

     

    http://reut.rs/1dLttqW
    3 Sep 2013, 11:39 AM Reply Like
  • Herr Hansa
    , contributor
    Comments (3080) | Send Message
     
    FRO is not taking the rates that Clarkson's is quoting. Fredriksen would be more likely to place some vessels in lay-up before going for those rates. Mostly much smaller companies are taking those rates to maintain cash flow, though at some point we will see more smaller players fail. That will remove some of the fleet as ships are idled due to financial disputes.

     

    Suez issues would help VLCC rates, though only on a temporary basis. Longer term we need to see some continued economic improvements. The supply of vessels remains an issue, and scrapping activity would need to increase to prompt an improvement in rates. Keep in mind not all vessels are available on the spot market, and longer term charters tend to be bringing in better rates at the moment.
    3 Sep 2013, 01:49 PM Reply Like
  • Lionel Yeo
    , contributor
    Comments (328) | Send Message
     
    Any comments on which company would be best positioned for a recovery? Frontline, Dryships, Scoipo, Frontline 2012?

     

    I'm concerned about the age of Frontline's vessels.
    14 Sep 2013, 02:24 AM Reply Like
  • Herr Hansa
    , contributor
    Comments (3080) | Send Message
     
    Frontline 2012 is more financially stable. At this point I have trouble recommending any shipping companies, other than Ship Finance (SFL). I do continue to hold shares in FRO, but I think it is a bit speculative until late 2014 early 2015. On a very long time line shipping is not bad, especially at whatever point in time dividends return. The problem is that this may take a couple more years.

     

    Natural Gas shipping is one of the few sectors still doing well. There should not be any oversupply issues until at least 2015. I have held shares in GLNG and GLMP for several years.
    14 Sep 2013, 05:32 PM Reply Like
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