1/ Time for a check-in on $NMM

With clean product tanker rates surging I have seen a lot of enthusiasm and speculation about what this means for EPS going forward.

Updated my model with the latest charters from 20-F and ran a spot rate sensitivity on remaining open/index days:
2/ Unfortunately most of $NMM's product tanker fleet is already fixed for Q2, gradually rolling off charter throughout the rest of the year and into 2023.

It seems more likely to be a tailwind to an already huge contract backlog in containers and strong expectations in drybulk.
3/ Personally I am expecting around $16 EPS and $700M of operating cash flow for 2022 with the way markets are shaping up.

This puts year end net debt and capital leases at around $900M and EV at around $1.8B
4/ With the shockingly low 2023 orderbooks in both #drybulk and #tankers I am much more bullish on rates. I would not be surprised to see mid $20k on tankers and low $30k on drybulk rates for the year.

This would yield around $25 EPS and ~$1B in cash flow for NMM in 2023.
5/ $NMM remains extraordinarily cheap with contracted revenue exceeding its enterprise value and the current scrap value of its fleet exceeding the value of its debt.

The question remains, will we see shareholder returns?
6/ In the latest conference call, CEO Angeliki Frangou has a distinct change of tone regarding growth vs returns and mentions a working capital requirement of $2M/ship ($290M total) which should be reached by the end of Q2. It could mean more shareholder returns starting in Q3.
7/ It was a bumpy ride with $NMM in 2021. It remains my largest position. If share buybacks ever come to pass, it is likely to unleash a coiled spring. We shall see.

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More from @AllVentured

Apr 27
1/ Below is a 20y chart of oil prices and the Baltic Dry Index.

Aside from being economically sensitive, there are a number of other reasons the two follow each other quite closely.

🧵
2/ As the oil price rises, ships slow down to achieve better fuel economy and save on fuel costs.

In a high oil price environment, ships will slow until the lowest total cost of operation is found.

This slowing reduces effective capacity and causes charter rates to rise.
3/ Both ships and oil also tend to follow the same investment cycle where a boom of investment leads to a supply glut, ensuing bust, and a long period of under-investment which sets up for another period of high rates. Rinse, repeat.
Read 8 tweets
Apr 17
1/ I'm going to pound the table a bit more about and show that shipbuilding capacity is insufficient to replace scrapping let alone accommodate trade volume growth.

But this time we will look at the global aggregate merchant fleet including all sectors.

🧵...
2/ Across all sectors, the global orderbook is only ~10% of the active fleet compared to ~8% that is already beyond economic life in the new high fuel cost/low emissions requirement paradigm. It the time it takes the ~10% to deliver, ~14% more will approach end of economic life.
3/ In 2022, ships reaching critical decision age whether to scrap or repair for compliance increases significantly and continues to increase each year this decade.

Notice in 2022 and beyond, the capacity of ships delivered fails to match capacity hitting the new 20 year wall.
Read 10 tweets
Apr 16
1/ 15 months ago I penned an article entitled "Welcome to the New Container Shipping Supercycle" questioning the premises of popular conceptions of supply and demand at the time.

Some reflections on what I got right and what I got wrong.

A 🧵...

seekingalpha.com/article/439810…
2/ New ship deliveries are not hard to predict 2 years into the future as it takes upwards of 18 months to build most ships from contract date. A dearth of new ordering through late 2020 ensured insufficient supply coming to market to through 2023 to meet demand.
3/ I was also correct that there was limited capacity to add additional megamax ships in 2024.

What I completely underestimated was the enormous demand and shipbuilding slot availability for new panamax ships in lieu of available megamax capacity.
Read 13 tweets
Apr 9
1/ #Tankers are the biggest beneficiary of changing trade patterns due to Russian sanctions. PERIOD.

A look into why tanker rates are surging this week and why this is just the beginning.

A 🧵...
2/ The picture is becoming even clearer that Russian oil which used to go via pipeline and short sea to Europe will go all the way to China and **BACK** instead.

bloomberg.com/news/articles/…
3/ **BACK** from China? YES. The West is structurally short on refining capacity and the deficit is getting larger as Russian refining capacity becomes shut in and European refiners struggle to source the slate needed to run at full capacity. reuters.com/business/energ…
Read 16 tweets
Apr 3
1/ After the initial spike on the news of the Ukraine invasion tanker rates initially retraced due to lack of employment while Russian exporters sorted out details on who would buy the oil.

With buyers found, aframax and suezmax rates are moving higher again on tight ship supply
2/ Even the massively oversupplied VLCC fleet has seen an uptick in rates (to slightly less loss-making levels) on the burgeoning tightness in the market.

But until this excess capacity in VLCC is removed from the market rates for smaller classes are likely to remain capped.
3/ So the question is how quickly is supply coming back to the market and when can we expect this VLCC excess capacity to be absorbed?

I will attempt to put the monthly 400kb/d OPEC capacity increase schedule into context as it relates to seaborne volumes:
Read 10 tweets
Apr 2
1/ Simandou back on track with a new firm deadline to start shipping 3/31/25.

At 100MMt/yr it will be second only to Vale's S11D mine in its impact to seaborne ton miles.

There are not enough ships nor enough shipbuilding capacity through 2025 to accommodate this start date.
2/ Lets do some back of the envelope math:

Capesize round trip from Guinea to China around 110 days at 11kt = 3.3 trips per year.

To ship 100MM tons this distance you need an additional ~145 Newcastlemax ships. This is roughly equivalent to the ENTIRE orderbook today.
3/ But todays orderbook will be barely sufficient to keep up with the new normal of earlier demolitions let alone accommodate the massive growth coming from Simandou:
Read 6 tweets

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