The past six months have been volatile for tanker shipping stocks after a remarkable 2022. The Drewry Crude Tanker Equity Index registered a gain of 0.6% YTD as a substantial jump of 36.5% in the index in the initial two months was largely offset by a decline between March and May. Concerns around the pace of economic recovery in China remain as indicated by the recent data that post-Covid recovery was faltering in the biggest crude oil importer. Moreover, fears of a potential global economic slowdown and production cut by OPEC+ in addition to seasonal weakness over the past three months are also dragging down crude tanker stocks. The index remained range bound and so far has slid 3.0% in June 2023.
Stock prices of product tanker shipping companies were also volatile over the past six months. The Drewry Product Tanker Equity Index moved up 18.6% between January and the third week of April on the back of firm demand and elevated vessel earnings for product tankers. However, the index came under pressure thereafter and plunged 31.2% between the third week of April and late June despite favourable market fundamentals as short-term macroeconomic headwinds and fears of global economic slowdown are dragging down stock prices of product tanker companies. Overall, the Drewry Product Tanker Equity index declined
18.4% YTD.
Tanker stocks may slide further over the next two months because of seasonal weakness, but we expect the share prices to rebound in the latter part of the year due to robust demand and favourable market fundamentals.
The reopening of the Chinese economy and increased Russian exports on long-haul routes played key roles in the unseasonally strong performance of tanker shipping companies in 1Q23. Moreover, recordhigh crude oil exports from the US Gulf supported the firm demand for oil tankers. Spot rates of mid-size crude tankers in 1Q23 were the highest ever recorded for the first quarter of a year. The companies are upbeat about the long-term prospects of the crude tanker market because of improving oil demand and a shift in trade patterns, supported by favourable supply-demand fundamentals.
Tanker shipping companies reported healthy toplines and profits in 1Q23. Average TCE revenues of companies under our coverage surged 224.5% YoY during the quarter. Nordic American Tankers – pure Suezmax player – benefited the most and recorded 461.1% YoY surge in its TCE revenue whereas the lowest topline growth of an impressive 112.1% YoY was recorded by Tsakos Energy Navigation – a company with diversified fleet and nearly 77% exposure to the time charter market.
Tanker shipping companies preferred to strengthen their balance sheets in addition to transferring the benefits of robust earnings to their shareholders in the form of cash dividends. Average leverage (debt/equity) of companies under our coverage improved from 95.1% in 1Q22 to 59.6% in 1Q23. Highest improvement in leverage was recorded by Ardmore Shipping at 29.3% in 1Q23 (vs 130.8% in 1Q22) whereas the lowest was seen for Nordic American Tankers from 61.5% in 1Q22 to 51.2% in 1Q23.
Source: Drewry Maritime Financial Research