Bank of America is not the only one forecasting a tanker rate surge in the second half of 2021 — but they appear the most confident.
The bank's shipping desk said in its year-ahead note published on Tuesday that an oil demand recovery is a matter of "when, not if", boosting both crude and product tankers in the second half of 2021.
"We believe crude and product tanker rates will be somewhat steady in 1H, before trending up in 2H, as demand for black oil and refined products gradually returns," Bank of America analyst Ken Hoexter wrote.
"We look for the year ahead in shipping to be characterised by tepid oil demand in 1H [on Covid-19-related overhang], sustained multi-year low orderbooks [given lack of new orders], persistent supply side disruptions [tempering some spot rate headwinds], and higher geopolitical risk premiums for tankers operating in the Middle East."
The note said the first half of the year would see rate seasonality capped due to floating storage drawdowns that add capacity back into the market, with scrapping potentially helping to buoy rates.
The second half will see demand in Europe and North America return as the Covid-19 vaccine becomes widespread, allowing for more personal travel.
Product tankers will be further supported by refinery closures, boosting tonne-mile demand.
Hoexter also said tensions in the Strait of Hormuz and Middle East Gulf would add a premium for ships travelling to and from the region, where a South Korean tanker was seized by Iran and limpet mines found on another ship off Iraq.
Bank of America said its top stock picks were Jones Act operator Kirby, which said even a tepid recovery for its inland barges would boost margins, and Scorpio Tankers due to its exposure to product tanker spot rates.
Its target price for Kirby is $63 and Scorpio $15. In early trading on Tuesday, the companies were trading at $58.14 and $13.26, respectively.
It also picked container lessor Triton International. Boxship rates jumped in the second half of 2020 thanks to stay-at-home consumer spending.
The bank expects those rates to weaken at some point this year.
The Bank of America note echoes forecasts from Gibson and Alphatanker, the latter two stressing caution in their predictions.
Gibson, which released its 2021 report on Monday, said tankers could start seeing "green shoots" by April, expressing "cautious optimism ... with vaccines, fiscal stimulus, and a gradual return to the new normal”.
