Drewry: Tanker Shipping Stocks Volatile in 2023

So far, the year 2023 has been very volatile for stocks of crude tanker shipping companies. Drewry Crude Tanker Index rallied at the beginning of the year, followed by a declining trend between the latter half of March and June. However, the index is on an uptrend from July on the back of better-than-expected economic data from the US and a robust demand outlook for crude oil. Overall, the index jumped 26.6% YTD and outperformed the broader S&P 500, which gained 13.8% YTD.

Stock prices of product tanker shipping companies were also very volatile in 2023. Drewry Product Tanker Equity Index moved up 18.6% between January and the third week of April. However, the index came under pressure thereafter and plunged 31.1% between the third week of April and late June. The index moved up 13.6% in the past one month, which partially offsets the losses in 2Q23. Overall, the Drewry Product Tanker Equity index slid 3.0% YTD and underperformed S&P 500 (13.8% YTD).

Second-hand asset prices also came under pressure during the month. The decline ranged from 0.5% for five-year-old VLCCs to 4.4% for 10-year-old MRs. Average TCE rates of tankers declined 20% MoM in July, primarily due to weak seasonal demand and ample availability of vessels at key loading ports – the key factor that led to the decline in asset prices. However, the fall was not prevalent across vessel classes as Aframax asset prices were largely unchanged, and asset prices of 10 and 15-year-old Suezmaxes inched up by 0.9% and 1.4% to USD 58mn and USD 37mn, respectively. We expect a limited downside to tanker asset prices amid favourable market fundamentals, and asset prices of on the water vessel may improve in 2H23.

Tanker Shipping companies under our coverage have thus far reported strong financial results in 2Q23. Euronav, Teekay Tankers and DHT Holdings reported their results, wherein the TCE revenue of these companies moved up on average by 145.2% YoY on the back of higher TCE rates across vessel classes.

Euronav was the top performer with a 191.2% YoY surge in topline to USD 321.5mn, and DHT Holdings reported the lowest growth among the three at 108.2% YoY to USD 114.0mn. As per policy, DHT has declared 100% of EPS as a dividend, whereas Euronav and Teekay Tankers preferred to keep a balance between rewarding shareholders with dividends and retaining part of earnings to strengthen the balance sheet during the quarter. We expect Frontline, Nordic American tankers and Tsakos Energy to report strong financial performance in 2Q23.

Only Ardmore Shipping was an exception, as the company’s TCE revenue declined by 8.4% YoY to USD 60.4mn due to reduced vessel earnings and a contracted fleet. The EU inventory is built up ahead of the ban on Russian refined products in February, above-average refinery maintenance during 2Q23 and short-term economic headwinds put pressure on the demand for product tankers. Adjusted EBITDA dropped 16.9% YoY to USD 35.1mn in 2Q23. Net profit declined18% YoY to USD 23.7mn.
Source: Drewry