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China’s PMI in June Impacts the Crude Tanker Industry

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China’s June PMI

China released its June PMI on July 1. In June, China’s manufacturing PMI was 51.5. The PMI fell 0.4% from the previous month, which indicates that China’s (FXI) manufacturing sector expanded at a slower pace. The PMI shows a country’s economic health.

The index remained above 50 for the 23rd consecutive month. A reading above 50 indicates an expansion, while a reading below 50 indicates a contraction.

The sub-indexes—output, new orders, new export orders—fell in June due to escalating US-China trade disputes.

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June Caixin PMI

The Caixin manufacturing PMI shows the outlook for small and private manufacturers, while the official PMI gives more weight to large state-owned companies. The Caixin PMI for June was 51—slightly down from 51.1 recorded in the previous month. The reading came in as expected by the economists polled by Reuters. The reading has been above 50 for 13 consecutive months.

Oil demand

Crude oil tanker investors should keep track of China’s PMI because manufacturing activities drive the oil demand. As the manufacturing industry expands, the demand for oil increases and vice versa. An increase in the oil demand turns into higher oil imports. China mostly imports crude oil using VLCCs. A change in VLCC rates impacts Suezmax rates. Teekay Tankers (TNK) and Tsakos Energy Navigation (TNP) have Suezmax vessels in their fleets. Nordic American Tankers (NAT) only operates Suezmax vessels. Navios Maritime Midstream Partners (NAP) doesn’t have a single Suezmax vessel in its fleet.

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