Stifel is tearing up its assumptions for a serious rates recovery in tankers – especially on the crude side – for the remainder of the year.
The move comes as the US investment bank says full recovery may be delayed into 2022 or 2023.
And while equity analyst Ben Nolan remains bullish on the prospects for dry bulk rates and stock valuations for the balance of the year, he suggests momentum in containerships may have peaked at current frothy levels with a downturn in the distant future.
Nolan laid out a scorecard for investors on Thursday ahead of the upcoming first-quarter earnings reports looming in a couple weeks.
And for those who might better relate to baseball terms, Nolan suggests that the tanker market is in the first or second inning of a recovery, dry bulk in the third inning and containerships in the seventh or eighth.
The most dramatic changes to Stifel's outlook come in crude tankers, where Nolan sees oil demand by the fourth quarter still 5% shy of pre-Covid-19 2019 levels, which he deemed "a balanced market".
The analyst proceeds to take a hatchet to his previous rates assumptions in that sector.
VLCCs for the full 2021 are slashed to a projection of $23,500 per day from a previous view of $64,750.
Suezmaxes plunge to an estimate of $17,000 per day from $48,000, while aframaxes dive to $15,000 per day from $33,250.
The dimmer view on crude applies to the current quarter, where Stifel had seen a rates lift that it no longer embraces.
For that period, VLCCs are now expected to bring in $18,500 per day from $32,000 previously. Suezmaxes are down to $13,500 per day from $25,000, while aframaxes tumble to $13,000 per day from $23,000.
Unlike some other pundits, Stifel sees the possible return of Iran to the market through relaxation of US sanctions to be a net negative for demand, not a positive. The projected hit is between 1% to 2% owing to the return of the Iranian fleet to the trade.
The report also cites the shift in balance from crude to clean products cargoes attending more refineries coming online in the Middle East, which should be moderately positive for product tanker tonnage.
Stifel is slightly increasing rates assumptions for LR2, LR1, MR and handysize product tanker tonnage in the current quarter. The bank leaves rates assumptions largely unchanged on the year, but does take LR2 numbers down to $17,500 per day from $19,000.
"Until underlying demand recovers more, it just means product tankers are likely to outperform on a relative basis, but not necessarily generate good absolute returns," Nolan wrote.
Stifel's top pick overall in the tanker sector is Belgian owner Euronav.
When first-quarter earnings are unveiled, Stifel expects DHT Holdings to be the only tanker owner under its coverage to report a profit, and that a small one at $0.02 per share.
The outlook is much better for dry bulk, which Nolan called "the place to be right now."
"The balance of supply and demand is increasingly pointing toward a bull market, not simply mid-cycle, which could have dramatic implications on cash flows, asset values and equity prices," Nolan wrote.
While Stifel suggested a slight reduction in capesize rates on the full year to $22,250 from $23,000, it raises assumptions in all the smaller vessel classes.
Kamsarmaxes, for example, jump to $18,500 per day from $14,500, panamaxes rise to $16,750 per day from $13,000 and ultramaxes increase to $14,250 from $12,500.
There is typically a 77% correlation between bulker ordering and charter rates, but this has been only 56% over the last six months "as owners are unwilling to take propulsion risk despite higher returns", Nolan wrote.
Stifel's top pick in the sector is Greek shipowner Star Bulk Carriers.
In containerships, Stifel described "the rock star market" of shipping, but also one in which "momentum has probably peaked."
Nolan wrote: "The real challenge is the huge wave of recent ordering, which has no near-term impact but is likely to translate into 2023 fleet growth well in excess of 10%. In other words, a downturn is almost certainly on the distant horizon."
Stifel likes Greek shipowner Evangelos Marinakis' Capital Product Partners as the most undervalued play and its top choice in the boxship sector.
