China auto sales supporting oil demand

Market Realist

Crude Tanker Indicators: Positive sentiment (Part 2 of 5)

(Continued from Part 1)

 

China’s car sales

Refineries have now resumed production and Asian refineries have booked ships thereby building on China’s crude oil imports and demand for crude tankers. Also, supporting it stable automobile sales cushion the industry by driving the oil demand. Rising purchasing power of consumers in China, support the industry growth. This high demand is keeping the country on track to overtake the U.S. this year and become the top oil importer.

Moderate June auto sales

According to data from China Association of Automobile Manufacturers, for the month of June, passenger vehicle sales increased 11.5% to 1.56 million vehicles compared to the year ago period as foreign automakers forayed into smaller cities with cheaper models posing a challenge to local carmakers. Domestic brands continued to struggle, with their market share falling 3.5 percentage points to 37.7%.

A divergence in passenger cars and commercial vehicle sales shows that China’s economy is transitioning from one that is led by government spending, construction, and heavy industry, to an economy that is increasingly tied to consumption.

First half sales and outlook

For the first half of 2014, vehicle sales increased 11.2% to 9.63 million as compared to the same period a year ago. China’s auto association foresees a slowdown in vehicle sales as more and more cities consider purchase restrictions. Total industry vehicle deliveries are now estimated to increase by 8.3% to 23.83 million units, compared with its January prediction of 10% growth.

However, industry research claims that commercial sales are more closely related to the economic situation while truck demand is connected to the investments and construction projects.

The transnational shift of consumers towards premium cars purchasing and increasing retail financing penetration rates for foreign-branded cars would drive crude tankers such as Tsakos Energy Navigation Ltd. (TNP), Nordic American Tanker Ltd. (NAT), Teekay Tankers Ltd. (TNK), and Frontline Ltd. (FRO). Also, the Guggenheim Shipping ETF would be affected

Further, let’s move on to see how China’s PMI data also supports the industry.

Continue to Part 3

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