VLCC rates are in a doldrum, down 85% from last year’s January level at $ 12,000 a day vs an average of $ 50,000 in 2020 and a peak of $220,000. 2020 was saved by Covid 19 and the extreme pumping policies of Saudi Arabia sending traders desperately for storage and in particular floating storage. OPEC + came back to sanity and Saudi Arabia decision to reduce production by 1 million barrel a day in February is adding misery to the tanker market.
Not everything is dark though… The order book of the tanker industry is low and only up 2% when scrapping should be as high as 5% this year. Chinese refineries are increasing their rates by 300 bp which should increase soon the oil on water. when the economy recovers in H2 and the capacity of the tanker industry is low, we may see a strong recovery of day rates. The valuations in terms of Price/Book are at the lows and advocate for building a midterm position in quality tanker names.
The other areas of shipping are bright.. Container rates have recovered to 9000$ from $2000. The Chinese industrial is strong which bodes well for Dry Bulk and LNG is the brightest spot. The extreme weather in North East Asia is pushing the electricity prices up and the demand for LNG.We like the sector at this levels…
