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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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Sunday, 06 December 15
DRY BULK MARKET ON REVERSE MODE, SET TO BREAK NEW ALL-TIME LOWS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has been the negative “star” of the shipping industry for quite some time. In fact if it wasn’t for the boomi ...
Sunday, 06 December 15
DESPITE TEMPTING NEWBUILDING PRICES, CONTRACTING IN DRY BULK REMAINS LOW - BIMCO
The current newbuilding prices for dry bulk ships has dropped so much that they just passed the lows of 2012 heading downwards and are now at the l ...
Friday, 04 December 15
FOB INDONESIA COAL SWAPS ARE ALMOST FLAT OVER WEAK DEMAND
COALspot.com: Indonesian coal swaps for delivery Q1 2016 declined month on month and rose slightly week over week. Coal prices seen very margi ...
Friday, 04 December 15
COAL PRODUCTION IN THE U.S. FOR W/E NOVEMBER 28TH FELL SLIGHTLY FROM THE PREVIOUS WEEK
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 15.0 million shor ...
Friday, 04 December 15
MINING OUTLOOK WEAKENS FURTHER ON FALLING CHINESE DEMAND - FITCH
COALspot.com: Fitch Ratings' outlook for the global mining sector in 2016 is firmly negative, reflecting our view that Chinese demand will cont ...
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- Interocean Group of Companies - India
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- Minerals Council of Australia
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- Pendopo Energi Batubara - Indonesia
- Economic Council, Georgia
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- The University of Queensland
- Larsen & Toubro Limited - India
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- Heidelberg Cement - Germany
- Iligan Light & Power Inc, Philippines
- Price Waterhouse Coopers - Russia
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- Jaiprakash Power Ventures ltd
- Aboitiz Power Corporation - Philippines
- Energy Development Corp, Philippines
- Agrawal Coal Company - India
- The Treasury - Australian Government
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- Globalindo Alam Lestari - Indonesia
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- Tamil Nadu electricity Board
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- Pipit Mutiara Jaya. PT, Indonesia
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- European Bulk Services B.V. - Netherlands
- Therma Luzon, Inc, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Transport, Egypt
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- SMC Global Power, Philippines
- Eastern Coal Council - USA
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- Meenaskhi Energy Private Limited - India
- Kumho Petrochemical, South Korea
- Star Paper Mills Limited - India
- Mercuria Energy - Indonesia
- London Commodity Brokers - England
- Electricity Generating Authority of Thailand
- Global Coal Blending Company Limited - Australia
- Sarangani Energy Corporation, Philippines
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- Energy Link Ltd, New Zealand
- GN Power Mariveles Coal Plant, Philippines
- Siam City Cement PLC, Thailand
- Vedanta Resources Plc - India
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- Ambuja Cements Ltd - India
- Marubeni Corporation - India
- OPG Power Generation Pvt Ltd - India
- Commonwealth Bank - Australia
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- Asmin Koalindo Tuhup - Indonesia
- Cement Manufacturers Association - India
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
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- Global Business Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Chamber of Mines of South Africa
- PNOC Exploration Corporation - Philippines
- Mintek Dendrill Indonesia
- Indika Energy - Indonesia
- Australian Commodity Traders Exchange
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bharathi Cement Corporation - India
- MS Steel International - UAE
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- Indogreen Group - Indonesia
- PTC India Limited - India
- Thiess Contractors Indonesia
- Lanco Infratech Ltd - India
- Singapore Mercantile Exchange
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- Central Java Power - Indonesia
- India Bulls Power Limited - India
- Renaissance Capital - South Africa
- Gujarat Electricity Regulatory Commission - India
- Bhatia International Limited - India
- Kepco SPC Power Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Ministry of Finance - Indonesia
- Mercator Lines Limited - India
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- Toyota Tsusho Corporation, Japan
- Medco Energi Mining Internasional
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- Australian Coal Association
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- Wood Mackenzie - Singapore
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- Petron Corporation, Philippines
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- CNBM International Corporation - China
- Directorate General of MIneral and Coal - Indonesia
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- Samtan Co., Ltd - South Korea
- Trasteel International SA, Italy
- Kohat Cement Company Ltd. - Pakistan
- Rio Tinto Coal - Australia
- Deloitte Consulting - India
- San Jose City I Power Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Malabar Cements Ltd - India
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