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China’s January Auto Sales Impact the Crude Tanker Industry

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Auto sales in January

In January 2018, China’s auto sales rose 11.6% YoY (year-over-year) to 2.8 million. China’s automobile sales have marked a fast start to the year. China’s sales rose for eight consecutive months. The growth rate spiked from last month. In December, China’s automobile sales were 0.1% higher YoY.

Automobile sales are a key indicator to watch when assessing China’s economic (FXI) health.

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Last year

In 2017, China’s vehicle sales totaled 28.88 million and were 3% higher than its vehicle sales in 2016. China’s sales are significantly lower than the 15.9% growth rate recorded in 2016. In 2016, China’s vehicle sales rose due to a cut in the sales tax on small engine vehicles. In 2017, the sales tax increased to 15% and auto sales struggled.

2018

The China Association of Automobile Manufacturers predicts 3% auto sales growth in 2018—the same as the growth rate in 2017.

Importance to crude tankers 

In any country, the transportation industry drives oil demand. As the number of vehicles increases, oil consumption also increases. Importantly, 49% of the total oil demand comes from the transportation industry. An increase in oil demand translates to higher crude oil imports. Investors should look at automobile sales to gauge the crude tanker industry. Higher crude oil imports into China benefit VLCCs (very large crude carriers). Navios Maritime Midstream Partners (NAP) operates six VLCCs, Tsakos Energy Navigation (TNP) operates three VLCCs, Gener8 Maritime Partners (GNRT) has 22 VLCCs in its fleet, and DHT Holdings (DHT) Holdings has 27. Nordic American Tankers (NAT) doesn’t have a single VLCC in its fleet.

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