Clarksons Platou Securities tunes forecasts

Tanker estimates cut amid view 2017 will be challenging but not disastrous, while demand growth spurs dry view.

Clarksons Platou Securities has cut its crude tanker rate estimates but boosted its bulker forecasts at a time when investors are displaying a positive view on global GDP growth for the first time in six years.

Analysts at the finance house expect the tanker market to face a challenging, but not disastrous, year in 2017, while a recovery in demand has led to more positive sentiment in the bulker sector.

Clarksons Platou Securities analysts are forecasting VLCC rates of $25,000 per day in 2017, down from their previous projection of $30,000 per day. For 2018, their forecast has been lowered from $40,000 per day to $32,000 per day, according to figures released in its latest quarterly report.

Its suezmax numbers for 2017 and 2018 have also come down, with the analysts charting rates of $18,000 per day this year and $23,000 per day next. This compares with previous expectations of $23,000 and $28,000 per day respectively.

“From 2018 onwards, OPEC will likely again be called on to raise output, assuming that the inventory correction is over,” the report said.

“Seaborne trade is then poised to rise again, possibly sharply, and will meet with slower fleet growth to produce another upswing in freight rates.

“For companies with a strong balance sheet, able to build value even in 2017, we find it more important to be too early than too late.”

Deep value in dry

On the dry cargo market, the analysts believe deep value still exists despite a climb in asset values and stock prices this year.

Clarksons Platou Securities is charting for capesize rates of $12,500 per day in 2017, rising to $14,500 per day in 2018 and further to $18,800 per day in 2019.

Previously, it had expected spot rates of $9,800 per day this year and $13,000 per day in 2018.

Its analysts say while little has changed on the supply side since the market hit all-time lows in March last year, demand growth has driven a significant sentiment change in the sector.

“The best performing dry bulk stocks have rallied more than 300% over the last 12 months and we are frequently asked if the stock market is running too far ahead of fundamentals. Our short answer is no,” its analysts wrote.

They note a 10-year-old capesize, which bottomed out at $12m in March 2016, is today worth $20m, a 67% rise.

“We remain positive to ship values and are encouraged by the recent increase in timecharter rates which are supporting higher asset values,” the analysts explained.

“At this point of the cycle, we view dry bulk as an investment, not a trade.”

Investor focus shifted

When Clarksons reported its annual results last week it noted an upturn in capital markets activity from the fourth quarter 2016.

“Because of the below-trend in new orders, a general theme supporting shipping investments is the expected low fleet growth for dry bulk, containers and tankers in the years ahead,” the report said.

“On the demand side, our impression is that investors have finally turned optimistic to global GDP growth, probably for the first time since 2011.”



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