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Supertanker rates bounce back — stocks don’t

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The tanker sector refuses to follow its script. Rates were supposed to keep on sinking into the summer. They didn’t. Rates for very large crude carriers (VLCCs; tankers that carry 2 million barrels of crude oil) have jumped well off recent lows, to nearly double last year’s rate.

VLCC spot rates have not been this high at this time of year since 2015. And yet, crude-tanker stocks continue to languish.

Rates on the rise

According to Clarksons Platou Securities, VLCC spot rates averaged $35,500 per day on Thursday, up almost 50% week-on-week. Some individual VLCC spot fixtures in recent days are even higher, near $50,000 a day.

Rates for Suezmaxes — tankers that carry 1 million barrels of crude — averaged $14,400 per day, up 32% week-on-week.

“Rates are not falling to OPEX [operating expense] levels like some predicted,” Jefferies analyst Randy Giveans told FreightWaves. OPEX for a VLCC is around $8,000-$10,000 per day and cash breakeven, including debt service, is roughly $25,000 a day, he added.

“The jury is out on whether the upward spiral will continue, but the summer looks much brighter now than it did a few days ago,” said shipping brokerage Fearnleys in its weekly market report.

What’s driving rates up?

Extreme congestion at Chinese unloading terminals is one driver of VLCC rates.

Argus Media reported that “most storage tanks around Qingdao port are full. … The pipeline system is also struggling to cope … [and] crude is being forced onto the rail system and the roads.” In Dongjiakou, it said there are “lengthy queues” for the sole VLCC berth. Given congestion, VLCCs are being rerouted to Tianjin and Ningbo, where cargoes have to be unloaded onto smaller vessels first to dock at berths due to shallow waters.

Evercore ISI analyst Jon Chappell (Photo: John Galayda/Marine Money)

“China congestion is certainly playing a role but there is never one answer,” explained Jon Chappell, analyst at Evercore ISI.

He told FreightWaves, “Floating storage levels are still elevated, so when you throw in port congestion, there are logistical issues that distort the actual tradeable fleet.

“Add the hope that Venezuelan-related sanctions could remove more capacity and owners have a bit more confidence in VLCCs than in other segments. In addition, U.S. exports have remained somewhat elevated,” Chappell said.

According to Giveans, “Incremental cargoes out of the U.S. and West Africa are helping rates, despite the drop in cargoes out of the Middle East Gulf. Congestion in China is adding to the duration of voyages, which tightens the market.”

Tanker stocks languish (except one)

With the notable exception of Nordic American Tankers (NYSE: NAT), this year’s rate strength has yet to translate into equity strength.

The floating-storage thesis dates back to early March. Rates began surging after Saudi Arabia opened the spigots after disagreement with Russia. Excess oil supply collided with coronavirus-stricken demand, forcing floating storage that tied up tanker capacity.

FreightWaves plotted the stock performance of the top listed crude-tanker owners versus each other as well as compared to the general stock indices from March 2 through Thursday.

The tanker stocks were up around 30% on average by late April compared to early March. NAT then completely pulled away from the pack, outperforming the others by roughly 50%-70%. As of Thursday, NAT was up 33% from March 2 while other tanker stocks were down on average by 16%.

The other stocks are: DHT (NYSE: DHT), Eurovan (NYSE: EURN), Frontline (NYSE: FRO), International Seaways (NYSE: INSW), Diamond S (NYSE: DSSI), Teekay Tankers (NYSE: TNK) and Tsakos Energy Navigation (NYSE: TNP).

NAT has also far outperformed the general indices. The Dow and S&P are roughly flat during the period, while the NASDAQ is up 17%, about half the gain of NAT. The basket of tanker stocks excluding NAT outperformed the main indices through the first week of June. Since then, it has increasingly underperformed the indices.

stock chart

Chappell of Evercore ISI has previously attributed the outperformance of NAT to its popularity among retail investors on the Robinhood platform and its unpopularity among institutional investors. Other tanker stocks that were popular with institutional investors fared worse, he speculated, because institutional investors took profits on those equities as they rose due to floating storage and “faded the rally.” NAT shares faced no such cap.

The rest of the summer

Asked about rate prospects for the rest of the summer, Chappell responded, “VLCC rates will always be volatile. I think we’ll likely see them below breakeven at some point this summer, but mostly in the $20,000-$40,000-a-day range.

“OPEC+ is supposed to remove 2.7 million barrels per day of [production] cuts starting in August. If that happens, there’s the short-term potential to break out above that range. But generally speaking, the drawdown of global inventories — both offshore and onshore — should continue to be a headwind.”

“We think rates are sustainable but will likely be range-bound in July and August,” said Giveans.

Could COVID spur another rate spike?

Michael Webber, founder of Webber Research & Advisory, has previously argued that tanker stocks could emerge as a “COVID-19 global-relapse hedge.” If the virus proliferates, another wave of large-scale business lockdowns would extend the floating-storage period and limit destocking, keeping more tankers out of the trading fleet for longer.

Jefferies analyst Randy Giveans (Photo: John Galayda/Marine Money)

Asked whether he believed a further surge in COVID cases could extend or add to floating storage, Giveans said, “I doubt we will see a similar spike in rates or in floating storage as we saw in March and April.

“That said, I do expect the contango [in crude pricing] to widen in the coming months.”

“And there is certainly concern about a second wave and slower-than-expected economic growth,” said Giveans. “That’s why the tanker equities remain at these oversold levels.”

According to Chappell, “Our macro team believes that even in a second-wave [COVID] scenario, we will not see the type of economic shutdowns that occurred in April and May.

“Given weaker overall demand, you need those types of extreme events — like oil demand dropping by 25-30 million barrels per day — for ‘supercontango’ and floating storage. So, we believe [floating storage] inventories will unwind and transport demand will be pressured in all but the most extremely and unlikely COVID and economic environments.” Click for more FreightWaves/American Shipper articles by Greg Miller 

MORE ON TANKERS: How retail investors on Robinhood could be skewing tanker stock performance: see story here. The COVID global relapse hedge theory of tanker pricing: see story here). For a look at the near-term headwinds facing the sector, see story here).

Source: https://s29755.pcdn.co/news/supertanker-rates-bounce-back-stocks-dont

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VeChain (VET), DNV’s Blockchain Solution Tapped for Aluminium Traceability

VeChain (VET), DNV’s Blockchain Solution Tapped for Aluminium Traceability

VeChain (VET), DNV’s Blockchain Solution Tapped for Aluminium TraceabilityNorwegian firm, Hydro, has adopted the “Tag.Trace.Trust.” traceability blockchain solution co-developed by VeChain (VET) and DNV. Hydro aims to use the distributed ledger technology (DLT) solution to prove to its clients that its aluminum is produced in accordance with sustainable standards, according to a LedgerInsights report on March 3, 2021. Hydro Taps VeChain (VET) DLT

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VeChain (VET), DNV’s Blockchain Solution Tapped for Aluminium Traceability

VeChain (VET), DNV’s Blockchain Solution Tapped for Aluminium TraceabilityNorwegian firm, Hydro, has adopted the “Tag.Trace.Trust.” traceability blockchain solution co-developed by VeChain (VET) and DNV. Hydro aims to use the distributed ledger technology (DLT) solution to prove to its clients that its aluminum is produced in accordance with sustainable standards, according to a LedgerInsights report on March 3, 2021. Hydro Taps VeChain (VET) DLT

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Trade with the Official CFD Partners of AC Milan
Source: https://btcmanager.com/vechain-vet-dnv-blockchain-aluminium-traceability/

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Hannah Testani Named as CEO at Intelligent Audit and Adds to Executive Team

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Intelligent Audit's Board of Directors has appointed Hannah Testani as the company’s new CEO along with new appointments at the executive level. Checkout PrimeXBT
Source: https://www.supplychain247.comhttps://www.supplychain247.com/article/hannah_testani_named_as_ceo_at_intelligent_audit_and_adds_to_executive_team

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History and Facts about Argon

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What are the noble gases? The noble gas group consists of the elements helium (He), neon (Ne), argon, (Ar), krypton (Kr), xenon, radon (Rn), and organesson (Og). It is the 18th (7A) group in the periodic table of elements. They are known to be odourless, tasteless, colourless, and non-flammable under standard conditions. They are called noble gases because they are already stable, unlike the other elements in the periodic table. They do not create bonds with other atoms to produce new chemical compounds.

Before, these gases are called rare or inert gases. However, it is also found that some of these elements are very abundant in our universe. Because calling them “rare” or “inert” was misleading, the word “noble” was introduced.

Noble gas: Argon and its history

Argon has an atomic number of 18 and an atomic weight of 39.948 atomic mass unit. About 0.93% of the Earth’s atmosphere is occupied by argon. It is a very abundant gas in the air, next to nitrogen and oxygen. From the production of oxygen and nitrogen, argon gas is produced as a by-product. You can also find small traces of argon in Earth’s crust and ocean waters. Argon is the most abundant and cheapest noble gas. Stable isotopes of argon are argon-36, and argon-38 and argon-40. Argon-36 is created by stars and the most common in the universe while over 99% of argon that occurs naturally on Earth is the argon-40.

Lord Rayleigh, an English chemist, and Sir William Ramsay, a Scottish chemist, discovered the argon gas in 1894. It is derived from the Greek word “argos”, meaning idle. However, before argon was fully discovered, Henry Cavendish, an English chemist and physicist, found a chemically less active substance than nitrogen, which is about 1% proportion of air. Then, Lord Rayleigh tried to isolate nitrogen from the air after a century, but it was not pure nitrogen that he isolated as he thought. He discovered that the element has a higher density than nitrogen. Then finally, in 1894, Sir William Ramsay started working with Lord Rayleigh. They collaborated to isolate this gas. After a series of trials and experiments, they proved that they had discovered a new element: argon.

The chemical reactivity of argon

Fluorine is also an element in the periodic table, considered the most reactive element. A French chemist, Henri Moissan, discovered fluorine in 1886. He was also the one who attempted to produce a reaction between argon and fluorine, but he failed.

According to Niels Bohr in 1913, electrons’ distribution in an atom is arranged in successive shells. In the electron configuration, the ideal number of electrons in the atom’s outermost shell must be eight, hence the octet rule. It is the reason why most atoms need to bond with other atoms, except for noble gases. These gases already have eight electrons in their valence or outer shell, making them the most stable gases.

Although argon is considered inert and already stable, it is also discovered that it can form at least one compound: argon fluorohydride (HArF). Leonid Khriachtchev, Mika Pettersson, Nino Runeberg, Jan Lundell, and Markku Räsänen reported this discovery in August 2000. The said compound is only stable at very low temperatures. If the temperature increases, argon fluorohydride tends to decompose. For this reason, the compound has no use in basic scientific research.

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