AllThingsVentured Profile picture
Mar 1, 2022 9 tweets 3 min read Read on X
1/ What do you get when you combine high fuel costs, impending emissions limitations starting in 2023, and record high scrap steel prices?

Large ships sold for scrap at much younger ages than usual despite an optimistic outlook on earnings.

Last week's demo sales per Advanced:
2/ It is no surprises to see large 18 and 19 year old tankers sold for scrap last week considering the weak rate environment but it is a bit of a surprise to see young capesize bulk vessels scrapped with rate futures expecting highly profitable rates in the balance of 2022:
3/ But I can't argue with the decision to sell an asset nearing the end of its life for more than double the scrap value that similar vessels fetched only 18 months ago.

That is nearly $15m of cash for each cape sold last week which can now be redeployed into a younger vessel.
4/ It is becoming hard to refinance these old polluting vessels. That $15m of capital from an 19 year old vessel that can't be financed when sold for scrap can easily buy an 8 year old eco vessel financed at 50-70% which garners much higher rates.
5/ High scrap prices, lack of ship finance, and new carbon regulations requiring expensive retrofits will ensure that old ships get scrapped much earlier than usual. Even in a strong rate environment, average capesize demolition age will likely be closer to 20 going forward.
6/ Meanwhile average fleet age continues to rise and the orderbook for new ships remains at all time lows as a percent of fleet.

We are on a collision course with a massive supply shortage of ships.
7/ This dynamic is playing out across shipping sectors but is especially pronounced in drybulk and tankers whose orderbooks are insufficient to replace scrapping and meet growing demand.

This is incredibly bullish for drybulk and tanker equities.
8/ Many of the largest and highest quality names in drybulk and tankers like $SBLK, $GOGL, $EURN, $FRO, $DHT have already surged and now trade at or above NAV. Although these remain great investments they are no longer 'cheap' relative to peers.
9/ Fortunately there are still some incredible bargains to be had with the smaller and more idiosyncratic names if you are willing to do DD and understand the risks.

Some of my favorite bargains of the moment include $NMM, $SHIP, $TNP and $CMRE.

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More from @AllVentured

Oct 8
1/ Buried under all of the Middle East and port strike chaos headlines, a very important debate about a carbon tax on shipping is ongoing at IMO meetings this week.

ft.com/content/407307…
2/ Support for a carbon tax is gathering momentum as it would be one of the most simple, economic, and effective ways to lower carbon emissions in the shipping industry. On the other side of the debate are middle income countries responsible for the lion's share of world trade
3/ These major exporters oppose it because it will increase the cost of traded goods which is partially borne by the producer and partially borne by the consumer. Image
Read 8 tweets
Feb 23
🚨 Breaking 🚨

Biden Admin sanctions 147 vessel Sovcomflot fleet as foretold in the below thread.

A nice gift on a Friday. If history is a guide and we can use COSCO sanctions as a proxy, Tanker longs should do exceptionally well next week.
Image
These sanctions actually DO work.

What few vessels the US has sanctioned due to Russian oil prior to Sovcomflot have been mostly stranded due to the sanctions.
Image
Image
I never trade after hours but felt compelled to today. Picked up a good chunk of $IMPP (had already been buying this dip earlier this week) and $TNK at fair prices. Tried for some $TNP as well but only got a bit.

I count 42x aframax and 15x suezmax in the sovcomflot fleet. If all of these are sidelined, I expect midsize rates to benefit the most which is why I bought the above. $NAT also a good option but already bid up much higher after hours.
Read 5 tweets
Oct 9, 2023
1/ Just like with the Russia/Ukraine conflict #tankers are likely to be the #1 beneficiary of renewed enforcement on Iran oil sanctions and associated changing trade patterns 🧵:

2/ The Biden Admin is in a tough spot. If Iran orchestrated the latest conflict in Israel, they will have to respond. How to do this without impacting oil prices? After all, turning a blind eye to existing sanctions has allowed Iran to increase exports by a huge ~500kb/d over the past year keeping a lid on prices.
Image
3/ Just like Russia/Ukraine, the strategic objective of the Biden admin will be to keep the oil flowing but limit the economic benefit gained from it by Russia/Iran as attempted with the price cap. Now that we know that price caps don’t work, what better way to do this than to drive up the cost to ship it?

Read 8 tweets
May 9, 2023
1/ Even if Biden succeeds at forgiving up to $20k of student loan debt and the Supreme court rules it as legal, it only eliminates $430B of the $1.6T of student loan balances currently in forbearance and scheduled to begin repayment by the end of August. Image
2/ Even though 71% of borrowers will still have a balance after $10k-$20k forgiveness or will not receive any forgiveness due to income, ALL eligible federal student loans currently remain in forbearance until this is resolved. Image
3/ Are those that know that they do not qualify or will have a remaining balance after forgiveness still making payments?

🚨🚨 NO 🚨🚨

Just 1.16% of borrowers continued making payments when 71% will still owe EVEN IF forgiveness goes through. Image
Read 9 tweets
Apr 28, 2023
I had previously speculated that China's impressive >10% growth rate in coal production was unsustainable.

YOY production growth continued to decelerate in March and is now being outstripped by power demand leading to a near doubling of imports YTD.

breakwaveadvisors.com/insights/2023/…
In prior years which saw abnormally large % increases in coal production like 2011 and 2015, the following year tended to be flat to down. Meanwhile China just approved the most new coal fired power gen capacity since 2015. ImageImage
Similarly India, the world's second largest producer and consumer of coal, managed a highly unusual and completely unsustainable increase in coal production last year to keep up with demand: reuters.com/markets/commod…
Read 7 tweets
Mar 11, 2023
1/ Regardless of what you believe about the $SIVB outcome, instead of the lazy gradual decline, deposits are about to fall off a cliff.

Depositors already had every reason to take their money elsewhere for yield, and it just became irresponsible not to:

2/ This is terrible for bank profits.

Banks will need to either pay a competitive rate on deposits or lose them.

How much of this is baked into bank earnings estimates?

3/ Regardless of what the resolution is with $SIVB, it seems likely that banks will tighten lending further and make fewer loans.

Fewer loans on lower margins, yet $XLF still well above pre-covid highs. Image
Read 5 tweets

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