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Tuesday, 01 December 15
TANKERS VERSUS BULKERS - JUST PLAYING CATCH UP? - CLARKSONS
 It’s now more than a year since the tanker market took off. In mid-2014 tanker earnings picked up and since then have been in the $30-$40,000/day range. But the market remains nervous. This tanker pick-up coincided with a slump in dry bulk earnings, which is interesting because on paper bulkers and tankers both seem to have surplus capacity. So why are tankers doing so much better than bulkers?
Long-Term Premium
On an “all sizes average” basis tanker earnings generally exceed bulker earnings (the tanker “basket” contains a greater share of larger ships). For example, between 1990 and 2015 to date tanker earnings averaged $24,996/day, whilst bulkers earned $13,933/day. That gives tankers a 79% premium over bulkers. During the seven years since the Credit Crisis, the premium has remained. Tankers have earned $18,281/day, compared to bulkers’ $12,427/day, a 47% premium. So the “premium” relationship held, even during a period of deep recession.
Earnings Distribution
However, during the period of recession tanker earnings have swung from below to above “average premium levels”. To illustrate this point we have estimated what tanker earnings “should have been” over the last seven years if they had followed the “average premium” relationship with bulker earnings over the full period back to 1990. This relationship was estimated using a regression equation as a “rule of thumb”, using monthly data for the period 1990 to 2015, and then used to estimate tanker earnings since 2009 from bulker earnings, shown by the red line on the graph.
For the first five years tankers underperformed compared to the long-term “average premium” versus bulkers, with the blue line, showing actual earnings, below the red line. But in 2014 they started to exceed the expected premium as bulker earnings dropped and tanker earnings increased. Currently tanker earnings offer a significant “bonus” above the estimated “norm”, at levels about six times higher than bulker earnings.
More Than One Answer
So what’s going on? The first answer is that tankers are playing “catch up” for the bad run early in the recession. But there are other answers to the question. One is that in 2015 oil trade has grown much faster than expected, increasing by 4% compared with only 2% expected earlier in the year. Another is the oil price collapse from over $100/bbl to close to $40/bbl, creating an opportunity for arbitrage by holding oil in ships, in anticipation of a price increase. Additionally, of course, bulkers have suffered from an absence of demand growth this year.
The Usual Suspects?
So there you have it. The tanker boom has gone on longer than many might have anticipated and tanker earnings are outperforming their long-run relationship with bulker earnings. But a “fundamental” surplus remains and investors might be right to be cautious. Scrapping has almost stopped, ordering has picked up and supply growth is set to increase. So, enjoy it while you can, and remember that it’s partly a game of catch up.
Have a nice day.
Source: Clarksons | Hellenic Shipping News
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Tuesday, 08 December 15
Q1' 16 API 5 FOB NEWCASTLE COAL SWAP CLOSED AT $ 36.73 A TON; 1.73% HIGHER COMPARED TO Q3' 16 PRICE
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery slid $1.47 per ton (3.85%) month over month to US$ 36.73 per ton. The swap ...
Tuesday, 08 December 15
HOW TO MITIGATE LEGAL RISKS WHEN PURCHASING BUNKERS - LESSONS LEARNED FROM THE OW BUNKER COLLAPSE - THE SWEDISH CLUB
KNOWLEDGE TO ELEVATE
About a year has passed since OW Bunker & Trading A/S filed for bankruptcy. The collapse shows that there are signifi ...
Monday, 07 December 15
5000 GAR CS (I) COAL INDEX REMAIN THE SAME OVER LAST WEEK
COALspot.com: The 5000 GAR CS (i) coal index remain the same over last week.
According to the CS (i) coal (system generated) index, the CS 50 ...
Monday, 07 December 15
COAL DEMAND IN 2016 FAILS TO SUPPORT PRICES; CFR SOUTH CHINA COAL SWAPS SEEN AT $US 42 A TON
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery declined US$ 1.70 (3.88%) per ton month over month.
A commodity swap ...
Sunday, 06 December 15
THE BDI DECLINED BY 3.09 PERCENT TO 563 POINTS ON 4 DECEMBER
COALspot.com: The BDI declined by 3.09 percent to 563 points on 4 December 2015.
The Cape index was also declined by 10.01 percent to 890 poin ...
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