Rates for product tankers also outperforming
As a result of the differences in supply and demand dynamics for crude and product tankers, rates for shipping refined oil have performed better than for crude oil since last year, as shown in the chart below. While rates for crude tankers have remained in a downtrend, making new lows in 2013, rates for product tankers have more or less stabilized. If product tankers are going to find a bottom here, then companies could be making good returns by purchasing new ships right now. Because ship builders have also expanded their own capacity to meet the rush of new ship orders over the past five years, they are now saddled with excess capacity.
Ship building prices following rate changes
With few shipping companies willing to place new orders for these vessels, because they were expecting lower rates ahead, ship prices also fell to a record low. But managers have become optimistic regarding the future outlook of the product tanker shipping industry. So they have returned to ship builders to place more orders, which has led to a rebound in building prices for Aframax and MR Clean vessels since the beginning of the year.
That development has also coincided with a rebound in share prices for Navios Maritime Acquisition Corp. (NNA) and Scorpio Tankers Ltd. (STNG). On a side note, prices for VLCC (very large carrying capacity) vessels have continued to fall throughout the last few months. But the indicator did increase in July, for what appears to be the first time since 2010. This may suggest that the future outlook of the crude shipping industry is becoming more positive.
- Part 1 - Why Navios and Scorpio have rallied more than 40%
- Part 2 - Supply and demand dynamics of crude tankers remain negative
- Part 3 - Why product tankers are performing better than crude tankers
- Part 4 - Why product tanker dynamics rebounded earlier than crude tankers
- Part 5 - Navios and Scorpio have been aggressive with new ship purchases
- Part 6 - Why new tanker deliveries add significant returns to earnings
- Part 7 - How financial leverage boosts returns from new ships
- Part 8 - Why Scorpio and Navios may not be that undervalued anymore
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