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Crude Tanker Stocks and ETFs: The Current Outlook

PART:
1 2 3 4 5 6 7 8
Part 4
Crude Tanker Stocks and ETFs: The Current Outlook PART 4 OF 8

What Crude Tanker Prices Tell Us about the Industry

Newbuild vessel prices

Newbuild crude tanker prices have been range-bound in the first eight months of 2017. VLCC (very large crude carriers) newbuild prices have hovered between $80 million to $82 million from January 2017 to August 2017. Suezmax newbuild prices ranged from $53 million to $54 million in that period.

What Crude Tanker Prices Tell Us about the Industry

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VLCC (very large crude carrier) newbuild prices fell 12.0% in 2016, and Suezmax prices fell 15.0%. According to data from Athenian Shipbrokers for August 2017, newbuild prices were as follows.

  • $81 million for VLCCs—the same as the previous month
  • $534 million for Suezmax, the same as in July
  • $43 million for Aframax, the same as in July

Secondhand prices

Five-year and ten-year VLCC values for August 2017 were $63 million and $39 million, respectively. Prices are down from last month’s $64 million and $40 million, respectively. Similarly, second-hand prices for Suezmax and Aframax are also down from the previous month. In August, five-year Suezmax prices were $40 million—down from $41 million in July. Five-year Aframax prices in August were $30 million—down from $31 million in July.

Time premium

We calculated the time premium as a ratio of five-year vessel values to the current newbuild price. A crude tanker’s life is generally 25 years, which means a five-year-old vessel should be worth 80% of the newbuild price.

When, in the short-to-medium term, an industry participant has a positive outlook on the crude tanker industry, they pay a premium on secondhand vessels to obtain ships immediately. In contrast, if the outlook is negative, assets have a lower value.

In August 2017, the above ratio fell to 77% from 79% in the previous month, which tells us that companies don’t have a positive outlook for the industry in the short term. This fall isn’t a good sign for companies like Frontline (FRO), Navios Maritime Midstream Partners (NAP), Gener8 Maritime (GNRT), Tsakos Energy Navigation (TNP), and Euronav (EURN).

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