The collapse in oil prices and the subsequent growth in oil consumption would benefit Hyundai’s shipbuilders and Daewoo Shipbuilding & Marine Engineering (DSME) as they construct oil and product tankers, a sector analyst has opined.
JP Morgan analyst Lee Sok-je noted that the crude tanker market rally continues in tandem with period charter rates.
The one-year time charter rate of very large crude carriers (VLCCs) has risen to a six-year high of USD47,500/day.
Suezmax tanker rates have risen to USD33,800/day, and Aframax tanker rates are at USD27,000/day, almost double their breakeven rates.
Lee said, “Low oil prices invited a sharp recovery in oil demand, and we see a continued shortage of tankers despite the weak seasonality.
“We believe key beneficiaries of the crude oil tanker rally will be DSME and Hyundai Heavy Industries, with their dominant market shares in the segments.”
The drop in oil prices has also begun filtering down to product tankers. Lee said, “The product tanker rally started almost 20 months after the spike in the crude tanker market, as significant product tanker orders were placed in 2013, and deliveries were concentrated in 2015.”
It appears that any concern with a glut of product tankers has been allayed for now.
Lee said, “We believe the concerns are turning into optimism. The average spot rates of product tankers have rallied to USD25,603/day (as of 26 June 2015), more than double the average of USD12,323/day in 2014.
“We believe the key beneficiary will be Hyundai Mipo, given its market dominance (30-40% market share).”