Cleaves Securities has slapped an almost blanket "sell" rating on the tanker sector as the rate bonanza ends.
After a period of incredible earnings, spot rates have now collapsed from the peaks of March and April, the Norwegian investment bank said.
VLCC numbers have dropped from $250,000 per day in March to $50,000 per day now.
Cleaves is forecasting rates of $30,000 per day for the rest of the second quarter.
The firm added that it remains "pessimistic" towards the second half of 2020 and beyond.
The downgrade has been made "as we think the new reality will inevitably dawn on investors", the outfit said. Cleaves had cut the sector from "buy" to "hold" in April.
"The oil market is rebalancing even sooner than we had expected, with the deteriorating contango in the oil price futures curve by and large removing floating storage as an option over the course of only one month," head of research Joakim Hannisdahl added.
"The new reality is a large fall in demand for oil transportation with the upcoming inventory destocking cycle adding to shipowners’ woes."
New boom in 2023?
He said the only thing saving owners from potentially the worst down-cycle in many decades is the lowest orderbook since 1996.
Hannisdahl is pencilling in a new super-cycle. However, companies will have to wait until 2023 for a strong rebound.
In the near term, Cleaves is estimating a 20% asset-value depreciation across the fleet.
The firm has assessed VLCC resales as worth $10m less at $93m, compared with its last estimate.
The short-term and medium-term outlook for the tanker industry is described as "bleak".
Cleaves is expecting an average 31% or 32% downside to its covered companies, including DHT, Frontline, Euronav, Hafnia, Hunter Group and Okeanis Eco Tankers.
But the bank does have one company still on a "hold" rating, Oslo-listed ADS Crude Carriers, an owner of three veteran VLCCs.
Cleaves could see its stock fall 6%, but is said to have "a low elasticity towards falling asset prices and is already priced quite low".
The company with the biggest potential to plunge is Nordic American Tankers, which has been attracting huge public interest due to the high profile of chief executive Herbjorn Hansson in the US.
NAT shares could fall 66%, Cleaves said.
