Tankers Are in the Starting Block

Tankers margins are finally increasing a bit. Ida had been a boost with cross Atlantic rates going up. Louisiana refinery utilisation is going down because of IDA which will increase refined products imports but also crude exports as there shall be a surplus of shale oil to be exported. With OPEC + increasing output, we shall see soon the positive impact on tankers. The situation for LNG is also quite strong. Russia which represents 2/3 of the gas used in Europe is playing tough on Europe. With JKM at $17 when the Henry Hub is at $ 4.2 per mbtu, it makes a lot of sense to sell the LNG in Asia. This also boosts the TTF at over $16 as European inventories of gas are 1/3 below normal… The outlook for gas tankers looks very good and FLEX which trades at 9% dividend yield and below book still looks good despite its 70% home run year to date. This could mean a lot for the need of increased LNG tanker capacity… China is keen to boost LNG use to replace coal and the recent policy to better redistribute wealth among all Chinese is likely to increase the energy consumption. Indeed, the average Chinese is “burning” 2.5 barrel of oil/Kwh equivalent vs 17 for an American. Increasing the purchasing power of Chinese by better redistributing wealth will thus have a booster effect on oil and LNG imports. The recent move by MAERSK to order 7 Methanol powered ships is not such a bad piece of news for LNG as a fuel. Indeed, it is very hard to produce green Methanol, it is very energy intensive and its efficiency rate is very low compared to LNG. We thus think it is a one off decision and not the beginning of a trend. In this context, GTT which designs Lng separation membranes for tanks faces a bright future and is a stock worth revisiting, especially given its diversification in ammonia and electrolisers.