Revisiting the Tanker Super Cycle

Having bailed in 2021, I'm re-entering the trade now.

I have a history of investing in tankers.

When I say history, I got my ass handed to me in 2020 -2021 (losing money on a sector post-March 2020's money printing was difficult, but I managed it).

I was captivated by the limited tanker orderbook and massive scrapping we were “about” to see and thought I’d brought myself a ticket on one of these spikes that have played out over and over again in the tanker market.

It wasn’t until this interview that I realised many of my assumptions were wrong/very early (this was one of my favourite interviews from my time at Crux).

Tankers: This Debate Changed My Investment Portfolio (30th April 2021)

Ben walked me through the two false dawns of the tanker super cycle box 2 (2014-2016 period) and box 3 (2019-2020), which was the consensus that IMO20 would cause large amounts of scrapping due to scrubber costs and tighter regulations.

Yet next to no scrapping occurred (granted, the oil price crashing and using tankers for storage played a large role).

The next catalyst we discuss is IMO30, where eco-designed ships, i.e. the requirement for new propulsion systems, were yet to be confirmed, which would prevent new build orders. Yet, as Ben goes over, companies could easily meet the requirements with slow steaming, new paint, and smart ship management as the emissions reduction was to be compared against 2008, which was a very high year for emissions.

At the end of this chat (April 2021), I concluded that with current tanker deliveries and limited scrapping, there was a large opportunity cost hanging out in tankers vs offshore oil services and thermal coal.

I did revisit the thesis here: Investing in Tankers revisited (29th August 2022) and brought three companies, although this was more a play on product tankers rather than crude tankers.