The 10 tanker stocks under the coverage of investment bank Jefferies have tipped into loss-making territory for the first time in 2024 after trading up an average 37.5% at their peak in May.
Jefferies lead shipping analyst Omar Nokta attributed the drop to “general malaise” gripping several shipping operating sectors at once, as voters queued at the polls for the US presidential election on Tuesday.
“The outcome of the US elections remains top-of-mind with many variables leading to a risk-off attitude in the shipping equity markets,” he told clients in a research note.
But asked if he had any view as to how the election results might affect specific shipping stocks, Nokta fell into the ranks of many US equity analysts who say the issue is too nuanced and volatile to draw any firm conclusions.
“Nothing in particular,” he said. “Obviously there are lots of different outcomes and many variables at play.”
As to the tankers, he said crude names have improved from the lowest rates of the third quarter, but have not yet experienced seasonal strength.
Rates have firmed in the US Gulf Coast MR tanker market, but remain softer elsewhere.
“Following yesterday’s pullback in equities, tanker stocks are now officially down on the year, with the group returning -0.5% so far in 2024. This compares with +37.5% at their peak in late May,” Nokta wrote.
The tanker stocks under his coverage are Frontline, Scorpio Tankers, Torm, International Seaways, Hafnia, Ardmore Shipping, Nordic American Tankers, Teekay Tankers, DHT Holdings and Tsakos Energy Navigation.
Some of these names were taking further losses on Tuesday.
Frontline was down a fraction from its previous close at $19.06, and well down on a 52-week high of $29.39.
Scorpio Tankers also lost a fraction to $57.79, down from Monday’s close and a one-year high of $84.67.
Product tanker giant Hafnia traded down slightly from a previous close of $5.69 and a 52-week high of $8.99, while VLCC pure-play DHT was about even with Monday’s close of $10.11 but off the yearly high of $12.80.
Nokta and fellow analyst Jonathan Chappell have urged investors to use the recent shares weakness to buy back into tanker stocks ahead of an expected winter rates rally.
But so far the argument appears to have fallen on deaf ears, even as some experts believe the possibility of an election win by former president Donald Trump could encourage a tanker market rally.
As Nokta explained in Tuesday’s note, it’s not just tanker stocks that have been caught up in the malaise.
LNG shipping tops the list with spot rates at record lows, while LPG names are range-bound but above break-even levels.
Dry bulk rates also have weakened, although capesizes appear to have found a floor at $20,000 per day.
The only outlier is container ship rates, which are having their third-best year in history.
“Unless rates improve across these various segments, there are likely to be 4Q estimate revisions downwards,” Nokta warned.
