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China’s thermal power output records marginal growth
Two main drivers suggest investments in renewable energies, nuclear power, and natural gas can be expected to take on greater importance for China.
Analysts expect Port Hedland export volumes to stay consistently high. Given the accompanying ramp-up in Brazilian iron ore exports, the Capesize market should be firmer in the latter part of 2014.
Shipments from Port Hedland represented 55% of Australia’s iron ore exports last year. More than 80% of this cargo goes to China.
China’s steel production mills are reluctant to reduce output for fear credit could be cut off and market share captured by rival producers.
When import levels of iron ore and coal imports are up in China, demand is high and shipping rates rise.
The stimulus measures introduced by China follow a string of weak economic data released in August. With higher credit available, China’s big banks are expected to channel funds into areas of economic importance.
Dry bulk shipping demand is closely tied to China’s growth. The PMI data confirmed reports of subdued client demand for new orders.
New build prices offer a better sense of future rates. Potential sellers are hopeful the freight market will rebound in the fourth quarter as predicted by many analysts.
When they expect demand to outpace supply, managers return to the shipyard to place new orders with the belief that the new vessels will generate a profit.
The BDI is rising on the back of greater iron ore shipping and rising demand from the Asian economies—China’s in particular.
The Guggenheim Shipping ETF (SEA) is an index weighted with dry bulk shipping companies. China is key to the current high yields in this industry.
Five-year very large crude carrier (or VLCC) prices remained consistent at $75 million—last month’s levels. On year-over-year (or YoY) basis, prices increased by 36%. Besides, ten-year VLCC prices stood unchanged at $48 million. They increased by 41.2% YoY.
Newbuild very large crude carriers (or VLCC) remained consistent in August 2014. The data was provided by R.S. Platou—a leading international ship and offshore broking company. August 2014 newbuild prices for VLCCs—the largest common ship used to transport crude oil over long distances—remained consistent at the July 2014 levels of $97 million.
According to the U.S. Energy Information Administration (or EIA), for the week ending September 12, 2014, U.S. crude oil imports from Canada hit a record high of 2.99 million barrels per day (or bpd). This was a 20% increase from the same period last year. Meanwhile, the four-week average on September 12 was 2.93 million bpd.
According to the IEA, the last four-week average for crude oil imports into the U.S., as of September 12, 2014, stood at 7.8 million barrels per day (or bpd). This is 3.7% less than same period in 2013. It clearly indicates that the U.S. is relying on domestically produced oil instead of imports.
China has a rapidly growing economy. It has a large population of 1.35 billion people. As a result, China’s energy demand is rising significantly. It plays a major role in the crude tanker industry. Economic activity and industrial output are expanding quickly. China needs to supplement domestic energy resources with imported supplies on an ever-increasing scale.
In order to assess the industry’s fundamental outlook, managers use the oil tanker orderbook. It’s an important yardstick. It includes the number of ships that have been ordered and the number of ships under construction. A rising orderbook usually suggests that oil tankers have a better expectation for future supply and demand dynamics.
Automobile sales support the shipping industry. When automobile sales grow consistently, it provides a cushion for the shipping industry. This drives oil demand. When China’s consumers’ purchasing power increases, it also supports industry growth. High demand is keeping the country on track to overtake the U.S. this year. It will become the top oil importer.
Analysts and money managers follow the Baltic Dirty Tanker Index (or BDTI). They follow the Index to assess the crude oil shipping industry’s revenue and earnings potential. The Baltic Dirty Tanker Index decreased to 699 on August 29, 2014. It was 826 at the beginning of the month.
Since China has a rapidly growing economy with a large population of 1.35 billion people, China’s demand for energy is rising significantly. This demand plays a major role in the crude tanker industry.