Tanker recovery hopes dashed
EVERCORE analyst Jon Chappell warned today that the tanker market will probably get worse before it gets better and that a recovery might not start until 2014.

The second half of this year ¡°is shaping up to be even worse than previously expected and the 2013 outlook is deteriorating on ongoing demand weakness¡±, cautioned Chappell.

He believes that surprisingly strong 1Q12 spot rates were the result of stockpiling in anticipation of Iranian sanctions and an inventory build-up before the launch of the Motiva refinery expansion in Texas. The Motiva expansion project has since been taken offline due to major hardware issues.

¡°These ¡®artificial¡¯ supports to the tanker market have already begun to reverse and this should be exacerbated by the indefinite downtime at Motiva, which we believe will result in severe pressure on tanker rates through the summer and also limit the typical seasonal recovery in 4Q12,¡± asserted Chappell.

Chappell has lowered his VLCC spot forecast for 3Q12 from $15,000/day to $14,000/day and for 4Q12 from $20,500/day to $16,500/day.

For full-year 2013, the analyst has cut his VLCC rate forecast by 10% to $22,500/day, his Suezmax forecast by 5% to $20,000/day, and his Aframax forecast by 22% to $12,500/day.

Chappell also reduced his rating on NYSE-listed NAT from ¡®equal weight¡¯ to ¡®underweight¡¯ today. ¡°Without an unexpectedly strong upturn in Suezmax spot rates in the near future, NAT will be forced to either finally reduce its dividend, add more debt to its balance sheet, issue more equity, or continue to operate an aging fleet in a time when high fuel prices are driving an increasing shift toward more fuel efficient assets,¡± concluded Chappell.