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DHT Holdings, Inc. Message Board

  • rationalthought11 rationalthought11 Apr 9, 2012 3:25 PM Flag

    Sobering data for bulls

    The tanker fleet grew by 26.1 million deadweight tonnes (mdwt), or 5.8 percent, during 2011, compared to an increase of 17.7 mdwt, or 4.1 percent, during 2010. A total of 39.6 mdwt of new tankers entered the fleet in 2011, a decrease from 41.5 mdwt in the previous year. A total of 13.6 mdwt of tankers were removed for scrapping or conversion during 2011, a decrease from 23.8 mdwt in 2010. Approximately 50 mdwt of tankers are scheduled for delivery during 2012; however, the Company anticipates an order book slippage rate of around 33 percent due to construction delays and order cancellations and estimate actual deliveries of approximately 33.5 mdwt. Assuming scrapping of 12 mdwt occurs, the Company estimates that the tanker fleet will grow by approximately 21.5 mdwt, or 4.5 percent, during 2012.

    Hard to make a bull case for rates. An industry already plagued by overcapacity will grow another 4% in 2012. ( this does NOT include about 16 mdwt of already booked orders for new ships originally scheduled for delivery in 2012 that will not be delivered until 2013. Oversupply in markets with long lived assets are verrrry slow to rebound. Just ask the printing industry how long that iron hangs around.

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    • Ahh the sociopathy of the internet, I succumb to it all the time. It's all fun n games anyway.

      It's prolly fair to say that the VLCC market is in the most dire condition of any shipping market. Almost every company in this market has either declared bankruptcy or kicked the bankruptcy can down the road with prepayments, and covenant amendments financed by massive equity dilution. Even FRO now brags that its break even costs for VLCC are about 16k a day down from 25k a year ago--How did they do it? Same way as DHT-- 300mm of new equity to prepay some debts and a moratorium on payments for 2013 and voila' your BE is now 15k.

      The key to investing in this market IMO is not rates but the due date of the company's next major repayment. Those companies that have some purchased breathing room at the expense of massive dilution are the only ones worth considering. Otherwise you are not playing the shipping market at all, you a playing "the whim of the lender" market, which cannot be analyzed using finance, and you wake up and find yourself holding an ONAV or General Maritime. I'm still on the fence but looking to get long (someday).


    • all that you mention is why all the shipping companies are so cheap right now, the market has corrected it all for that, myself I, look for oversold situation in down pressed market and average 3k per day that way. I told people to buy this at .765 and the ones tha follow have made good money in one day, I have a system, will not share it but will telll when to buy and I am right 9 times out of 10

    • Do you have a breakdown for the additions to the tanker fleet based on oil transport versus product transport? Articles I've seen have indicated new buildings were being switched from oil to product tankers, including LNG tankers.


      • 1 Reply to ghost14609
      • Not specifically but finished product is the tail and raw crude is the dog. As we know, the tail rarely wags the dog. I've spent a lot of time looking to get long, but I think that you have plenty of time. (as in 2015 or so) to do it. Tanker and bulker markets are the ultimate leverage play, financial and operating. Ships are financially leveraged 80-20 or so. Transport costs, at almost any price, still make up only a fraction of the price of the product being shipped. As such sipping costs are quite price inelastic, which gives shippers tremendous pricing power in times of excess demand. A VLCC carries about $210,000,000 of oil (at 100 dollars a barrel) That's why producers were able to pay $200,000 a day in the spot market.

        The supply of new ships is very inelastic in the short run, but once excess capacity is in place the leverage swings hard the other way. It takes about three years to bring on capacity (from order to delivery) but about 25 years to get rid of it. And shippers will lease at any rate that provides less of loss than laying up a ship. The only thing they won't do is lease at a rate less than voyage cost.

        Good luck. But if you think things can't get worse, you may be in for an unpleasant surprise (starting with the dividend.)

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