Supertanker rates are poised to surge to a two-year high by December as China’s demand for oil sends ships the equivalent of 11 extra times around the globe in a month.
The 31 percent jump in China’s imports increased return journeys for supertankers to about 1.13 million miles in April, or 284,000 miles more than a year ago, based on customs data and voyage lengths. Daily rates may reach $100,000 by December, said Rikard Vabo, an analyst at Fearnley Fonds ASA, whose November recommendation to buy shares of Frontline Ltd., the biggest supertanker operator, earned 49 percent. His prediction for freight is 43 percent higher than the June 11 price of $70,025.
China, the engine of the global economic recovery, is going further to get oil, with Angola a bigger provider than Saudi Arabia this year. Longer journeys combined with what the International Energy Agency says will be record consumption in 2010 are driving shipping demand even as forward freight agreements show prices will average $44,944 for the third quarter and $45,466 in the fourth.
“China is the U.S. of the 1960s and Japan of the 1970s as its thirst for oil grows,” said Charlie Fowle, chairman of London-based shipbroker Galbraith’s Ltd. “As China strengthens ties with countries such as Angola and Venezuela, in addition to Middle Eastern suppliers, it increasingly means tighter supply in the tanker market.”
The nation’s economy will expand 10.1 percent this year, more than three times the pace of the U.S., the world’s largest energy consumer, according to as many as 87 economists surveyed by Bloomberg. Fueling that growth will require an extra 669,000 barrels of oil daily, the Paris-based IEA predicts, equal to more than two additional supertanker cargoes a week.
China is already the biggest user of commodities from copper to coal, spurring a rush for raw materials across the globe. Venezuelan President Hugo Chavez said in April that China would lend $20 billion and form a venture to pump crude. Petroleo Brasileiro SA, Brazil’s state-controlled oil company, signed a $10 billion-loan accord and a supply contract last year. China National Petroleum Corp. has operations in 29 countries from Equatorial Guinea to Sudan.
Oil purchases from Angola reached 4.29 million metric tons in April, about 70 percent more than two years earlier, customs data show. Saudi Arabia supplied 3.09 million tons. The average journey from Angola to China takes more than 33 days, compared with 21 days from Saudi Arabia, according to the distances.com website. Venezuela to China takes almost 40 days.
Of particluar note... " Daily rates may reach $100,000 by December, said Rikard Vabo, an analyst at Fearnley Fonds ASA, whose November recommendation to buy shares of Frontline Ltd., the biggest supertanker operator, earned 49 percent. His prediction for freight is 43 percent higher than the June 11 price of $70,025."..
Even if we approximate $100,000 by December, the profit sharing coming from FRO will substantially higher than even 2 years ago which means a much higher stock price and dividend payouts eventually moving to their all time highs of $2.40.
Anyone thinking of unloading SFL will be one sorry camper next year.