Shipping: Oil tankers sheltered from gas, dry bulk weakness

Fri Aug 7, 2015 8:36pm EDT
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By Sinead Carew

(Reuters) - Maritime stocks have broadly fallen this year as weak demand for some commodities and goods in Asia and oversupply of ships have hurt much of the industry, with one notable exception: Oil tankers have been doing a booming business and their shares are up as much as 50 percent year to date.

Growth in oil tanker shares can run a bit longer, analysts and investors say, though they see weakness in dry bulk, liquid natural gas and container shipping extending into 2016 or beyond.

The broad maritime market, as represented by the Guggenheim Invest Shipping ETF SEA.P, has fallen 8.5 percent so far this year. The Guggenheim ETF includes companies ranging from oil tanker Nordic American Tankers Ltd NAT.N, which has risen 48.7 percent, dry bulk carrier Navios Maritime (NM.N: Quote), whose shares have fallen more than 11 percent, and liquid natural gas shipper Gaslog Ltd GLOG.N, which has fallen 31.7 percent.

Shippers of crude oil and refined oil products have been able to charge their highest daily rates in years because elevated oil production has led to strong shipping volume. Investors see high volume oil shipments keeping the tanker fleet busy as the Organization of the Petroleum Exporting Countries focuses on market share over oil prices.

"The next 18 months or so should be pretty good," said Ian McDonald, an analyst at asset manager T. Rowe Price, which holds shares of Teekay Tankers, TNK.N, which have risen 42.7 percent this year.

Even after that runup, Teekay Tanker is relatively cheap with a 5.4 ratio of enterprise value to earnings before interest tax, depreciation and amortization compared with a 9.3 average since its late 2007 initial public offering, according to McDonald.

Oil tanker investors are also looking forward to winter. Summer rates typically trend lower because capacity is less constrained when seas are smooth and daylight hours are long, making for more efficient trips than in winter when ships are tied up.

Winter heating oil demand will also boost ship use, according to Douglas Mavrinac, analyst at Jefferies in New York, citing industry expectations for an increase in crude demand.   Continued...

Street signs for Wall St. and Broad St. hang at the corner outside the New York Stock Exchange March 24, 2015. REUTERS/Brendan McDermid