Analysts have highlighted an unprecedented gap between hammered stock prices and the buoyant tanker market, leaving a huge potential upside for company values this year.
Cleaves Securities called the spot rate environment "extraordinary", with daily numbers topping $250,000 per day at one point this month, as the oil price fell and Saudi Arabia flooded the market with crude during the Opec+ price war.
The financial firm said companies are adding net profit similar to 14% of their market capitalisation each month on average, despite the coronavirus prompting big stock sell-offs.
"In light of the recent rout in share prices, there are some incredible opportunities in our view," head of research Joakim Hannisdahl said.
Greece's Tsakos Energy Navigation (TEN) has a potential upside of 291% from its current market capitalisation of $156m, while Norway-listed ADS Crude Carriers could add 224%, it calculated.
BW Group-owned product tanker giant Hafnia could see its value rise 201%, with Oslo-listed VLCC owners Okeanis Eco Tankers and Hunter Group potentially rising 195% and 189%.
Crude giant Euronav has an upside of 105%, while rival Frontline has 88% upside potential.
Hannisdahl said: "Although we understand the current dynamics of the equity markets, impacted by a general withdrawal of funds creating a necessity to indiscriminately liquidate positions, we cannot ignore the market’s disconnection from valuation."
'Horrible March'
Fearnley Securities assessed VLCC spot rates down to $100,500 per day from the Middle East Gulf to South Korea on Monday.
Hunter Group achieved $80,000 per day for six-month term charter deals for three of its VLCCs last week.
Fearnley said Norwegian shipping equities are down 50% so far this month.
"Shipping has had a horrible March," the investment bank division of broker Fearnleys said.
It added that the discount to steel is growing to "unprecedented" levels, particularly for gas vessels and boxships, but also for bulkers, where shares in many cases are as low as the 2016 trough.
"Obviously, we acknowledge that the outlook is particularly challenging at the moment, but history has shown us that the best shipping bets are made when stocks are bombed out and fairly priced even on all-time low asset values," Fearnley analysts Espen Landmark Fjermestad, Peder Nicolai Jarlsby and Ulrik Mannhart said.
"We are especially following the dry and LNG segment at the moment for any green shoots."
Long-term complications?
Cleaves said the surge in oil supply has potential negative ramifications in the medium term for tankers.
"If the low oil prices persist for months, US exports could be hit from 2021, having a negative effect on tonne-mile demand growth for oil tankers," the investment bank added.
Cleaves has a buy rating on all of its covered tanker companies.
Its top pick is ADS Crude Carriers, where current spot rates could generate net cash flow similar to 32% of the current market cap each month and add equity equal to 29% of the market cap.
TEN could similarly generate monthly net cash flow of 23% versus market cap and add equity worth 27%.
"Although short-term share movements are uncertain, we do see shares significantly higher in one year," Hannisdahl said.
Cleaves said the "good news" is that tanker demand is driven by oil supply, not oil demand.
Hannisdahl expects governments and private companies to take advantage by stockpiling more oil onshore.
He pointed to sudden and steep contango, where spot prices are cheaper than future barrels, prompting the use of VLCCs and suezmaxes for storage.
