Tanker owners could be prompted to sell a part of their fleet in order to take advantage of the existing bullish market sentiment and capitalize on potential revaluations. In its latest weekly report, shipbroker Allied Shipbroking said that “the tanker market has pivoted towards a bullish trajectory for many months now, amidst a turbulent era in global energy markets. Yet many still hold mixed feelings. Within the current geopolitical turmoil, the blurred outlook for the Chinese economy, the depths of the ongoing energy crisis, and the strategical positions of OPEC+, it seems as though the “unknowns” are too many to support any strong conviction over any market prospects”.
According to Allied’s Quantitative Analyst, Mr. Thomas Chasapis, “one source of higher risk within shipping markets can be asset price levels themselves. Higher prices are often seen as a prime indicator of a bullish market, but they need to always be accompanied by, or at least show firm prospects of higher freight rates. Otherwise, they can trigger even higher volatility within times of excess distress. The below graph points out the accelerated improvement in 5-year asset price levels (for VLCCs and Suezmaxes) both in absolute terms, as well as, in terms of momentum, with the use of the True Strength Index (TSI) technical indicator. The TSI’s role is to capture early trading signals and price reversals, and/or to highlight periodical “Overbought” and “Oversold” conditions. Having used price data for the past 10 years or so, it is apparent that we are already in an “overbought” state”.
“Moreover though, given the below historical trends, we could expect one or two back-and-forth shifts in direction, before any firm negative shift comes into play. This assumption, however, is purely based on historical trends. Current asset price levels were nourished off the back of a growing conviction within the market of even more fervent freight market levels prevailing in the short run. How certain can we be, at this point, that freight earnings with delivery current expectations?”, Mr. Chasapis wondered.
Allied’s analyst concluded that “this analysis is not a bearish dissonance. Quite the contrary. It is a but an alternative angle to approach the current market’s overall trend. From a purely SnP point of view, being a Seller now seems like a relatively “fair” strategy (at the expense of potentially losing out even higher freight returns). However, buying and selling shipping assets is not as simple as it may sound, and it is not the optimal strategy for everyone. From operational difficulties to stakeholder governance, either increasing or decreasing one’s portfolio comes with certain “inconveniences”. At this point, should we be more focused on the market’s short-term momentum and overall potential? A better strategy may well be to start “capitalizing” the recent positive market shifts through some advanced hedging strategies”, he noted.
Nikos Roussanoglou, Hellenic Shipping News Worldwide