Morgan Stanley chopped its rating on the shares of four tanker and LPG carrier stocks as analyst Fotis Giannakoulis expressed fears that the crude tanker sector is in a downturn that could continue for two years.

Giannakoulis, who follows shipping stocks for the bank, downgraded New York-listed crude tanker owners Euronav and DHT Holdings and products tanker specialist Ardmore Shipping to “equal weight” from “overweight”. And he slashed his take on LPG carrier owner Navigator Holdings to “underweight” from “equal weight”.

In a note to clients, he said he expects serious pressure on dividends for all the crude tanker owners that his investment bank tracks, except Tsakos Energy Navigation.

Through 2018

“We see the crude tanker market experiencing a cyclical downturn through 2018 on slowing crude production, lower refinery margins, high crude stocks lead to inventory draws [and] rising fleet supply,” the analyst wrote.

“Thus, we expect most crude tanker earnings to disappear over the next 18 to 24 months before the market rebounds toward year-end 2018.”

Morgan Stanley’s view on the LPG carrier market is gloomy, with expectations that the market will slump over the next two years.

Mounting LPG woes

Giannakoulis said the gas carrier trade is suffering from cargo cancellations, bearish export economics and a growing fleet. The orderbook and Panama Canal expansion are adding to the oversupply scenario.

Though his downgrades included Ardmore, Giannakoulis said he is cautiously optimistic on the products tanker sector.

“Provided global oil demand remains robust and refinery margins stay profitable, [the] record low product orderbook levels, rising global refinery capacity and rising Chinese exports offer a more favorable outlook for product tankers,” the analyst wrote.

Shares slump

The shares of all four downgraded companies fell Thursday.

Euronav’s New York-listed shares lost 7.6% to reach $8.58, although that also followed an announcement that the crude tanker owner’s board declared a $0.55-per-share dividend that represented a 32.9% decline from the payout in May.

Ardmore Shipping saw its stock price slump 6.6% to $7.11 at the close of trading on the New York Stock Exchange.

Navigator Holdings shares shed 7.9% to end the session at $7.58. DHT Holdings slipped 4.5% to $4.45.