Why China’s oil imports drive global tanker stocks

Market Realist

Tanker stocks weekly analysis August 5–9 (Part 6 of 10)

(Continued from Part 5)

China replaces the United States in oil shipments

There are two key driving forces of oil shipment demand today, which has been a trend for the past five years: an increase in growth in China, countered by a decrease in oil shipments to the United States. In 2010, the largest importers of oil in the world were the United States, China, Japan, and India. The United States imported 459 million metric tonnes of oil (21% of total), while China, the second largest, imported 239 million (11% of total), according to data from the U.S. EIA (Energy Information Administration). Driven by economic growth and car use, China imported a record amount of 271 million metric tonnes of oil in 2012. But over the same period, the United States reduced its import to 423 million metric tonnes due to a domestic energy boom (explained in Part 7).

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World Crude Imports 2013-07-17

Negative year-over-year growth

Although we’ve seen higher oil consumption from 2012, (see Part 5), a recent monthly report by RS Platou (an international ship and offshore brokers and investment bank) shows that global shipments of oil fell 3.0% year-over-year during the first five months, which was worse than the -2.6% seen for the first four months. Weak import growth from China, due to last year’s stockpiling activity, and continued production growth in the United States were the main causes for the negative year-over-year figure. That has negatively impacted tanker companies earlier this year.

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Seabourne Trade

China’s oil import to rise 

On an annual basis, China’s 2013 oil imports are unlikely to grow much from last year, because China continued to import more oil even while consumption growth fell due to lower economic growth in 2012. However, oil imports could rise further throughout the second half of this year, as the country’s currently importing less its long-term trend line. Higher industrial output, driven by better outlook in Europe (China’s largest trading partner) and the government’s determination to maintain stable growth throughout the end of the year and meet its target of 7.5% economic growth adds to the probability of its oil imports rising.

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China Crude Oil Import 2013-08-12

 

If this were the case, it would positively impact tanker rates in the short to medium term. This would then be positive for tanker companies such as Teekay Tankers Ltd. (TNK), Tsakos Energy Navigation Ltd. (TNP), Nordic American Tanker Ltd. (NAT), and Frontline Ltd. (FRO). The Guggenheim Shipping ETF (SEA) would benefit as well.

Continue to Part 7

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