After four years of mainly positive news, shipping investors must deal with more uncertainty.
That is the view of Pareto Securities’ head of research, Eirik Haavaldsen, as the Norwegian investment bank opened its two-day annual energy conference on Wednesday morning.
The conference will gather about 160 companies and a record 2,000 participants at Holmenkollen, Oslo’s renowned venue for cross-country skiing and ski jumping.
“It has been four fantastic years for shipping and shipping stocks. Everything has performed pretty well. But what will happen now?” Haavaldsen asked in an interview with TradeWinds.
Macroeconomic uncertainty related to global growth, China and geopolitical events has increased significantly, contributing to the recent upturn, according to Haavaldsen, who covers shipping companies for Pareto.
In addition, there is an orderbook that will start to be delivered in mid-2025.
“It is difficult to see that the demand will grow as it has in past years. These are factors that make the market uncertain,” he added.
Currently, the sentiment is negative for shipping stocks. Short-term, it is an opportunity to invest in tanker stocks, according to the analyst.
“We think the fourth quarter will be good for tankers. In the short term, there will be a winter market. The VLCC rates will be good,” he said.
In the long term, it is harder to have a clear view because of the increased uncertainty.
Haavaldsen sees a discrepancy between shipping companies and shipping stock investors.
The stock market always tends to be six to 12 months ahead of the physical market.
“The shipping companies are more positive than the stock investors. I think that maybe Q4 will be peak optimism in the shipping market. It doesn’t feel like that at all in the stock market now,” he said.
Especially for product tankers, the fourth quarter could be the top of this cycle, according to Haavaldsen.
“Product tankers have a larger orderbook. We are close to a peak. The fourth quarter could be the highest in this cycle and maybe for a while. Next year’s fleet growth could lead to lower utilisation next year,” he said.
The supply side is different from earlier upturns.
The tanker fleet is older and the market needs newbuildings.
Previous cycles have declined due to demand shocks when optimism was highest. Additionally, falling rates typically lead to increased scrapping of older vessels.
There has already been a drop in productivity for older tankers, Haavaldsen pointed out.
“We don’t think a downturn will last long because the orderbook is not very high. It is a less alarming supply situation,” he said.
The demand side is harder to predict in the long term.
“What is scary is the structural backdrop regarding energy demand. Are we at peak oil? That backdrop is demanding and difficult. There is a structural risk for tankers,” he said.
Haavaldsen has worked at Pareto for 13 years.
When he started, shipping stocks were a niche investment, but today they attract more investor interest than ever before.
“Shipping has become more and more important. It is now more mainstream. There is much more interest. We have more one-on-one requests for shipping. Shipping companies are among the most requested companies,” Haavaldsen said.
