@VadimPlz @ClassicValueInv Dry bulk is much different for several reasons.
1- Ships are built to do 25-30+ yrs. Besides fuel burn there is almost 0 difference between a 26y or a 2y ship. // Tankers start to get passed over 15+ and are generally avoided 20+. Surveys for tankers 17.5+ are very expensive.
1- Ships are built to do 25-30+ yrs. Besides fuel burn there is almost 0 difference between a 26y or a 2y ship. // Tankers start to get passed over 15+ and are generally avoided 20+. Surveys for tankers 17.5+ are very expensive.
@VadimPlz @ClassicValueInv Dry bulk demand core is iron ore and coal, both of which are driven almost entirely by Asian growth and stimulus. Coal future looks weak. Iron is purely Brazil-China. Iron looked good in ‘19 then singlehandedly got disrupted by $VALE. COVID wrecked ‘20.
@VadimPlz @ClassicValueInv The dry bulk fleet is not particularly old nor is the orderbook super small. @JamesCatlin76 has been hammering on this for a couple years. Dry bulk orders have gotten massive Chinese stimulus via Valemax and VLOC programs.
@VadimPlz @ClassicValueInv @JamesCatlin76 The only crucial argument for dry bulk on the supply side was that IMO2020 would help drive a cost wedge between modern and 10+ tonnage. That thesis failed when spreads were $60 instead of $300/ton
@VadimPlz @ClassicValueInv @JamesCatlin76 Shifting back to #tankers, the supply is the best we’ve ever seen. Oldest fleet balance in modern history and lowest orderbook in over 25 years. Demand is based on ton miles (+storage for a limited time). Ton mileage has been steadily growing and not solely based on consumption.
@VadimPlz @ClassicValueInv @JamesCatlin76 It doesn’t take an apocalyptic level of rates to drive hefty scrapping at 22.5, 20y and even 17.5y surveys. We saw healthy demolitions even in 2017-2018 at lower rates and that was before BWM and IMO2020 requirements.
@VadimPlz @ClassicValueInv @JamesCatlin76 Contango has been over simplified and overhyped. Was it amazing for 60 days? Yes! But it’s now gotten so simple that “high contango is good, low/no contango is terrible.” It helped drive more storage, but tanker demand is based on exports and specifically ton miles.
@VadimPlz @ClassicValueInv @JamesCatlin76 The same thing happened last fall with “COSCO sanctions.” Narrative got so simplified that everyone just said tankers are up bc sanctions so short them bc sanctions will come off. Rates were high bc supply/demand was super tight. COSCO was a bonus/spark but not entire reason.
@VadimPlz @ClassicValueInv @JamesCatlin76 Finally, contango is much smaller now, indeed. But that’s relevant for loadings and trades in July-August. All the loadings we are seeing today were based on contango spreads 4-6+ weeks ago. Floating storage is still growing, this past week was actually one of the largest builds.
