January 19th 2016
Jefferies is expecting the crude tanker market to stay strong into 2017 but its outlook for bulker owners is decidedly less cheery.
While tanker owners will continue to rack up profits though the next two years, all six bulker owners covered by the bank’s shipping research team will remain rooted in the red.
In a report issued ahead of the fourth quarter results season, Jefferies analysts led by Doug Mavrinac inched up their VLCC rates view for 2016 and introduced a strong forecast for 2017.
Mavrinac says the tankers last year enjoyed the strongest year since 2008 and raised his VLCC projection for 2016 from $45,000 to $50,000 per day.
The following year will to see a small retreat, but Jefferies estimates $45,000 per day will still be on offer for VL owners in 2017.
With Chinese demand expected to worsen and dry rates failing to rally in the seasonally strong fourth quarter, Jefferies has trimmed its capsize rate projection for 2016.
The ships were expected to earn just $8,000 per day this year. That has now been reduced to $7,250 daily; a level Mavrinac believes will persist in 2017.
This will mean Diana Shipping, Genco, Golden Ocean, Safe Bulkers, Scorpio Bulkers and Star Bulk all recording persistent red ink during the next two years, according to estimates in the report.
“We believe continued weak Chinese iron ore and coal import demand will fail to stimulate dry bulk shipping demand sufficiently to offset the significant oversupply of dry bulk carriers that has built up in recent years as a result of significant fleet growth between 2009-2013 and weak dry bulk carrier demand growth beginning in 2015,” Mavrinac wrote.