Weakness in Chinese Economy–Impact on Tanker Industry?
Analyzing Key Crude Tanker Industry Trends in September 2015
China PMI
Markit’s manufacturing PMI (Purchasing Managers’ Index), which is an indicator of a country’s economic health, stood at 47.3 for China in August. This was a fall from July’s index reading of 47.8 and the lowest level seen since 2012. For the sixth consecutive month, the index reading is below 50, which is considered the neutral mark. China, one of the largest economies in the world, continues to experience weakness in its manufacturing activity. China’s oil consumption, which is related to its economic activity, is a major factor that drives overall crude oil (DBO) demand.
China’s auto sales
One of the major petroleum products consumed in China is gasoline, which is impacted by the automobile industry. For the past five months, the YoY (year-over-year) growth in automobile sales has been negative.
According to data from CAAM (China Association of Automobile Manufacturers), 1.6 million cars were sold in China in August 2015. This is a 3% YoY fall. The drop in auto sales, which hampers crude oil demand, occurred amid the slowdown in the Chinese economy.
The auto manufacturers’ group had previously forecasted China’s auto market to grow by 7% in 2015, but in July it slashed this growth estimate to 3%.
China’s oil demand
China’s oil demand has shown gains, especially in the petrochemical and transport sectors, which outweighed weakness in industrial oil use. According to the oil market report by the International Energy Agency, China’s oil product demand remained relatively muted at ~3% in 2016.
Weak car sales data, the decline in industrial activity, and many other indicators such as factory output are signs that the slowdown in the Chinese economy has continued. In the September OPEC report, China’s growth forecast was also revised downward. This will negatively impact oil demand, which in turn will impact the crude tanker industry and companies such as Frontline (FRO), Nordic American Tankers (NAT), Teekay Tankers (TNK), Euronav (EURN), DHT Holdings (DHT), and Tsakos Energy Navigation (TNP).
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