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Falling oil prices affect the crude oil tanker industry
A stronger greenback makes US dollar–priced commodities like oil more expensive for buyers using weaker currencies, which in turn tends to hit commodity prices negatively.
The International Energy Agency (or IEA) recently cut its forecasts for global oil demand growth for 2014 and 2015 on continuing weaker expectations for world economic growth.
With rising energy demand from the economic powerhouse of Asia, China has been buying more oil from abroad amid a slowdown in the economy’s growth rate.
The number of US oil products supplied indicates the consumption of petroleum products. It measures the disappearance of these products from primary sources like refineries.
Canada is a top oil exporter to the US. According to Statistics Canada, shipments of energy products—including bitumen from Alberta’s oil sands, the world’s third-largest oil reserve—are the largest component of Canada’s exports.
Falling US imports affect the crude tanker industry in a negative way. Fewer shipments to the country indicate less shipping demand, all else being equal.
In order to assess the industry’s future fundamental outlook, managers use the oil tanker orderbook as an important yardstick. It consists of the number of ships that have been ordered and the number of ships under construction.
Since secondhand vessels can be delivered within a few months, they tend to reflect industry participants’ expectations for medium-term fundamentals and rates, unlike newbuilds, for which two years of delivery time is mandatory.
A tanker takes almost two or three-plus years to build, and each costs more than ~$60 million. Unlike shipping rates in the spot market, newbuild prices are less volatile and aren’t subject to seasonality.
The Baltic Dirty Tanker Index interests analysts and money managers. They use it to assess the revenue and earnings potential of the crude oil shipping industry.
Energy transportation is driven by global economic growth and differences in consumption and production, which reflect in cyclical freight rates that vary according to vessel supply and demand.
China is the world’s top iron ore and coal consumer. China imports almost 60% of the world’s seaborne iron ore, while its coal trade accounts for almost a quarter of the global trade.
China’s crude steel production is a key indicator that dry bulk shipping investors should watch. This is mainly due to iron ore primarily being used to manufacture steel.
As the government focuses more on environmental sustainability and sustainable growth, it’s putting more effort into pollution reduction.
Among the key materials used in construction of buildings, steel plays a key role. China’s real estate activity has a direct relationship with shipping demand, as iron ore and coking coal are the components used to make steel.
Newbuilds versus second-hand vessel values Second-hand vessels are characterized by faster deliveries, so they reflect short-to-medium term fundamentals. Second-hand vessel prices tend to be more responsive to changes in current rates…
An indicator to gauge bulk vessels’ fundamental prospects, ship prices include newbuild vessel prices and second-hand vessel prices.
Ship orders’ importance Orderbook is an indicator that investors can track for the longer run, as dry bulk ships generally take one or two years to construct. Managers’ expectations of…
Being the second-largest iron ore exporting country, Brazil accounts for almost 25% of market share. The country is home to Vale, one of the largest mining companies.
The world’s iron ore seaborne exports mostly comprise exports from Australia that find use with the major industry companies like BHP Billiton (BHP), Fortescue Metals Group (FMG), and Atlas Iron.