04-07-2018

LR1 Tankers, Handysize Bulkers and Panamax Containers: Q2 Forecast winners

The price of prime aged vessels is expected to rise over the next two years. Putting extended trade disputes aside, most market segments have favorable tailwinds. The contraction of yard capacity is expected to support the replacement value of ships, while short term earnings have either bottomed, or started to recover in most markets. The charts below show the expected performance of a fixed age five-year-old asset. Vessel specific forecasts are available to subscribers.

Tanker asset values look set to climb as the current culling of the fleets older units will help lead to a finer balance between supply and demand. The decision by OPEC and Saudi Arabia to put more barrels into the market should increase the cargo count in the Arabian Gulf. This will lead to a rosier outlook for the second half of the year than many predicted.

LR1s look poised to see the highest gains. The run up in demand for distillate flows ahead of the 2020 bunker switch over should benefit large clean product tankers. LR1s are currently seeing depressed asset values, and the expected value on mean reversion alone should benefit owners.

Dry bulk asset values are seeing the benefit of a higher earnings environment brought on by a steady rise in ton mile demand and fleet recycling efforts in 2016 and 2017. Upside remains as scheduled deliveries of outstanding orders are moderate.

The containership market should see a rebound as the consolidation of commercial controllers is leading to more sustainable rate structure. Asset values are expected to retain their increases through the end of the forecast window due to the small orderbooks in most segments (ULCV excluded).

Source: Vessels Value

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