Key influential drivers that affect crude tankers (Part 8 of 9)
The importance of China’s auto sales data
China’s automobile sales are another key indicator that analysts and investors watch. As autos are the largest end users of oil, high auto sales growth often leads high oil consumption and oil imports, which supports tanker demand and rates. High car sales growth also means the economy is doing well. With the economy booming, more and more people will be able to purchase cars. On the other hand, when sales are slow, they’re often negative for oil consumption, imports, and shipments.
Automobile sales units jumped in September
As the above chart shows, oil imports have historically lagged year-over-year growth in car sales. This reiterates the importance for tanker investors to look at car sales. Based on the latest data available, the number of automobiles sold rose from 16.5 million in August to 19.4 million September. The year-over-year growth jumped from 10.28% to 19.69%. The six-month rolling average year-over-year growth, which shows the longer-term trend, jumped from 10.87% to 12.44%.
China’s car ownership has much farther to go
In the past, China has been known as the country of bicycles. With little money to purchase cars, most people had to bike to travel from one place to another. But that’s rapidly changing as the country’s economic growth continues to fuel wage increases. Car ownership in China was only at 54 cars per 1,000 people in 2000, according to the World Bank. The world average was 120 cars, while developed countries averaged 500-plus. This means car use in China is still under-penetrated and there’s much room for growth. As China is transitioning to a more consumption-driven economy, car sales and oil demand aren’t likely to slow down as much as people may think.
Interpreting the current data
The past few months of car sales growth suggest fuel consumption will increase in the months ahead, which would support oil imports. Robust car sales are also a reflection of solid economic growth. This is long-term positive for crude tanker shipments and for companies like Teekay Tankers Ltd. (TNK), Nordic American Tanker Ltd. (NAT), Frontline Ltd. (FRO), and DryShips Inc. (DRYS). This also applies to the Guggenheim Shipping ETF (SEA), which partially invests in crude tanker companies.
Browse this series on Market Realist:
- Part 1 - Key tanker stock drivers: Why you should follow tanker trends
- Part 2 - Key tanker stock drivers: Crude tanker stocks may have bottomed
- Part 3 - Key tanker stock drivers: Why shipping scrappage fell