ABGSC on the shipping sector: “We believe this cycle has the potential to stretch further than any earlier cycle”

ABGSC analyst Petter Haugen shares his thoughts on the shipping sector, ahead of our upcoming virtual Shipping Seminar

 
Petter Haugen is an Equity Research Analyst in ABGSC’s Oslo office, covering the shipping sector. In an interview, we asked him for his thoughts on the industry.
Where is the shipping sector at right now?
“The shipping sector, situated in the middle of all the global supply-chains, has seen unprecedented volatility during the past two years”, says Haugen. “Still, overall earnings are at very high levels, even after the recent decline in container rates. However, the orderbooks of new ships are not building as much as one would think and several shipping segments now experience high rates, but record low orderbooks”, he explains.
“This is perhaps the main reason why we at ABGSC believe this cycle has the potential to stretch further than any earlier cycle (yes, we know that is a bold statement), in particular in those segments which are most exposed to the all-consuming ‘carbon aversion’ the world has experienced over the past three to four years. It is not that easy for investors to convince themselves that building a new tanker – a vessel which will transport oil, i.e. pure carbon, for the next 20 years, using heavy fuel oil for propulsion – is a good investment”.
What macro events will you be keeping an eye on?
“Again, with shipping in the middle of all global supply chains, any material macro event is relevant to the sector,” says Haugen. “The upcoming sanctions on Russian crude oil and petroleum products are examples of the types of changes which we will keep an eye on; no one really knows how they will pan out, but all we do know is that shipping will be impacted”, he explains. “Also, the recently announced cuts in OPEC+ production will likely be a key topic during our upcoming seminar, together with the outlook for the Chinese economy.
“But who knows”, he continues; “it is still several days until the seminar and as we have experienced many times in the past couple of years: a lot can happen in a short space of time!”
What are the most interesting companies to follow right now?
“We are particularly curious about the tanker market and how it will develop from here”, says Haugen. “The US recently turned net with regards to long seaborne crude (i.e. the US is now exporting more crude than it imports on ships) which, in combination with US refining already running close to maximum utilisation, probably implies that the lion’s share of potential growth in US oil production is likely to be exported. That in turn means the marginal supply of crude oil to the world will need to travel two to three times farther than the distance it previously travelled when the Middle East and Africa were the main sources of oil export growth”.
Tell us about the Shipping Seminar; is there anything specific you are looking forward to?
“The next couple of years should be highly interesting across all segments”, Haugen notes. He explains that “Car carrier rates have never been higher than now, and we still haven’t really started to electrify the global car fleet. Plus, LNG carriers are posting new all-time high rates every week, while dry bulk recently saw spot rates below operating costs, driven by a locked-down Chinese economy. So, there is plenty we will talk about in relation to the more conventional shipping themes.
“I am very much looking forward to hearing DNV’s view of the impact of the EEXI and CII regulations from 2023”, says Haugen, adding that, “In this seminar we will also hear from Tor Svelland (of Svelland Capital), who comes with a broad background from commodities, shipping and trading. With his broader perspective, I hope that he can teach both myself and the audience something about the theme of how ‘everything is connected to everything’ and describe the resulting opportunities for the ‘middle-man’ in everything: the shipping sector”.
 
ABGSC’s virtual Shipping Seminar, “How long will this upswing last”, will be held on 13 October.
Speakers will include the CEOs of Klaveness Combination Carriers, Golden Ocean Group, Belships, Himalaya Shipping, 2020 Bulkers, Flex LNG, Golar LNG, Cool Company, BW LPG, Wallenius Wilhelmsen, Gram Car Carriers and SFL. Additional industry experts presenting will include: Tor Svellland, Founder and CIO of Svelland Capital and Tore Longva, Principle Consultant at DNV.
ABGSC clients can access the full agenda for the seminar here.
RSVP: invitations@abgsc.no
 
Please note, the seminar is open to ABGSC clients only.