Tanker Fleet Growing At 7%, Oil Demand Falling 1.6%: Number 1 Marine Transportation Analyst Sees Entire Shipping Industry Caught In The Doldrums

• On 1:38 pm EDT, Wednesday October 7, 2009

67 WALL STREET, New York - October 7, 2009 - The Wall Street Transcript has just published its Transportation & Logistics Report offering a timely review of the sector to serious investors and industry executives. This 81 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: China Export Tax -- Overcapacity in the Shipping Industry -- Market Balance -- VLCC Traffic Flow -- Asia-Pacific Region Transportation Growth -- Import/Export Traffic -- Distressed Shipping Balance Sheets -- Terminating Markets -- Tanker Companies Versus Dry Bulk Companies -- Chinese Infrastructure Stimulus -- Real Demand Versus Stimulus Demand -- Monitoring Potential Acquisitions -- Automobile Industry Demand Forecasts -- Demand in Emerging Countries -- Falling Demand -- Future Oversupply -- Growth of Fleets -- Pickups in Infrastructure Spending -- Navigating the Downturn -- Chinese Cell Phones Market Growth -- Affects of Declines in Passenger Flights -- Capacity of Passenger Aircraft -- Improvement in Volumes -- Pricing Margins -- Restructuring and Consolidation -- Chinese Government Ship Building Infrastructure Growth -- Wage Concessions -- Railroad Expansion

Companies include: Diana Shipping (DSX); Star Bulk Carriers (SBLK); Nordic American Tankers (NAT); Overseas Shipholding Group (OSG); General Maritime (GMR); Federal Express (FDX); UPS (UPS); Forward Air (FWRD); Expeditors International (EXPD); Express-1; Tsakos Energy Navigation (TNP); Navios (NM); Vale (VALE); Excel (EXM); Teekay (TK); DryShips (DRYS); UTi Worldwide (UTIW); Old Dominion (ODFL); Arkansas Best (ABFS); J.B. Hunt (JBHT); Con-way (CNW); Atlas Air (AAWW); Air Transport Services Group (ATSG); Norfolk Southern (NSC); Union Pacific (UNP); CSX (CSX); Canadian National Railway (CNI); C.H. Robinson (CHRW); Kuehne and Nagel; Deutsche Post; YRC Worldwide (YRCW); Dynamex (DDMX); Ryder ®

In the following brief excerpt from just one of the 8 interviews in the 81 page report, the industry leading Marine Transportation equity analyst discuss the outlook for the sector and for investors.

Natasha Boyden is a Managing Director and Senior Research Analyst covering Marine Transportation for Cantor Fitzgerald. In 2009, Ms. Boyden was ranked as the #1 Marine Transportation Analyst by Starmine/Financial Times for 2008. In 2008, Ms. Boyden was ranked as the #3 Marine Transportation Analyst by Starmine/Financial Times for 2007 and #2 for 2006 and also ranked as one of the top 5 industrial transportation analysts in the Wall Street Journal's 2007 and 2006 Analyst of the Year Awards. Prior to joining Cantor, Ms. Boyden served as Sidoti & Company's transportation equity research analyst for four years where she focused on domestic and international shipping and railroads. Ms. Boyden created Sidoti's transportation research group and was named "Best Rookie Shipping Analyst" by Marine Money magazine in December 2002. Ms. Boyden began her career in Investment Banking at Donaldson, Lufkin & Jenrette. Ms. Boyden graduated from the University of Bristol with a Bachelor of Arts Degree in Economics and Social History and is a frequent contributor to major news and industry media outlets.

TWST: Here we are kind of halfway through the year or three quarters of the way through the year rather, what's going on from a business perspective at this point, is it still as bad as it's been?

Ms. Boyden: That depends on which sector you are talking about. With tankers, yes, things are pretty bad. There is really not a lot of promising signs of recovery out there. The OPEC cut is still causing a lot of problems with the decline in supply. In fact, they cut production by about 4.2 million barrels last November. Kuwait recently announced it doesn't expect OPEC to further cut in this month, but at this level things aren't great.The other problem is, there continues to be high levels of inventory, which is definitely causing a problem. The US clearly stands at about 337 million barrels and the SPR is at about 99% of capacity. Also about 30 to 35 VLCCs are being used as floating storage, which is around 70 million barrels. Finally I think we can look at oil demand growth has been seriously impacted by the global recession. The IEA does expect oil demand to fall about 1.6% to about 84.5 million barrels a day, and that would be about the lowest level it's been in about five years. The last thing would be the order book, which so far year-to-date about 414 vessels have been delivered to the fleet about 35.2 million tons. Over the last eight months, the fleet is growing about 7%. If you combine all those things on the demand side with the supply side, it's really not a big surprise, but we see rates on the majority of subsectors being at breakeven or below. Quite frankly, we would expect that to stay that way for a little while.

TWST: Where do we go from here, is there any signs of relief on horizon?

Ms. Boyden: Not at the moment. We were looking at a recent little upswing in suezmaxes, where that could be due to things calming down in Nigeria politically and then they're able to export more oil from that. But for the most part, I don't really see a tremendous amount of relief coming over the horizon over the next six months. A lot of it will depend on how much tonnage is scrapped, as rates continue to stay down at this level. It really doesn't make economic sense to continue operating these vessels and pay for them when the vessels really aren't earning a decent rate.

TWST: Are we seeing any signs of that yet?

Ms. Boyden: We've seen a little bit, but quite frankly I haven't probably seen any kind of scrapping that we have the dry bulk. I know a lot of people talk about the 2010 IMO regulations, but it's worth noting that a lot of the tanker fleet is already double-hulled, and there aren't that many oil majors single-hulled. I think Exxon (XOM) is the only one that does and so I don't think it's going to have as much impact on the fleet as some people think it will.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 81 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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