In recent years large crude tankers are down having taken a good kicking, and today punters don't seem to like the look of them. However, a survey of earnings in each major sector during the five years since the 2008 crash tells a slightly different story, which is worth looking at closely.
To calculate an earnings ratio for each ship type since October 2008, average monthly earnings were divided by estimated operating expenses (OPEX). The result is a percentage showing earnings as a multiple of OPEX. For example 300% means that the average earnings was three times operating costs, a good result. 100% would mean that the average earnings equalled operating expenses, with no free cash. This ratio was calculated for the 10 ship types shown on the graph and ranked with the biggest ratio at the top.
Top of the list with 300% are Capesizes. Investor sentiment backs this up, even if five years ago Capes looked like they were on the slipway to oblivion, with an enormous orderbook and doubts over Chinese steel demand. But the most interesting feature of this survey is that two of the top four places in the ranking go to types that popular sentiment does not appear to care for. Those prime-time underdogs, VLCCs, come fourth, with a 223% earnings ratio and Suezmaxes are even higher in second place with 243%.
The middle ground is occupied by Aframaxes and Panamax bulkers, with ratios of 190% and 179%. Not such a bad result. Finally at the bottom of the table are the products tankers at 140%-160% and the containerships. MR products tankers have been recent favourites with investors, with more positive fundamentals today, but these figures (although precise earnings can be hard to track due to complex trade patterns) reflect some tougher periods in the last five years.
Technical issues aside, there are four points. Firstly, over the five years everyone made a bit of cash, mostly in the earlier years. Secondly there is a striking correlation between the earnings performance and size. Three of the top four performers are all over 100,000 dwt, with some mid-size vessels in the middle ground. Thirdly, big tankers generally did little worse than bulkers, maybe due to the smaller orderbook. Finally, the worst performers were container charter ships, illustrating the danger of relying on "trickle-down" income from beleaguered liner companies.
So there you have it. Big tankers have performed relatively well since the crash, but now they're on the rack of market sentiment and falling US imports. Of course the next few years could be a different story; with only 10.5% of the fleet on order and fewer contracts then deliveries, there's not much wrong with future supply. The problem is on the demand side, but is that really as bad as it looks? You decide. Have a nice day.
