Good Morning, it's heavy going so I'd get plenty of coffee.
Drilling slowdown begins in the US (Courtesy of FT & KempEnergy via Reuters). It's beyond doubt now that CAPEX has been slashed what there is no need to do is state the obvious so please see Kemp's chart where there's an obvious drop coming.
If one was to think back to the exploration for all minerals in 2012 the cycle is now set for oil and as such drilling rigs and associated services are under massive pressure (price taker). It does not bode well for those contractors and drilling operators, on the flip side, those listed entities that transport the product are likely to be in greater demand as tankers become in short supply for 2-3 years See FT Article: Tanker market benefits from oil rout Joel Lewin — London for part of the story, obviously here for the rest.
Some pertinent issues that have impacted on the shipping rates positively. Namely the weather in Black Sea, Mediterranean and Caribbean. In Summary Black Sea/Aegean Sea (Turkish Straits) delays were averaging 6-8 days the result being higher rates but not for all classes of shipping. The Gulf of Mexico has had greater than normal weather impacts on shipping setting back schedules and the glut of supply increasing shipping demand for petroleum tankers. Add in that speculation is coming in to play both for stockpiling for consumption and speculation to resell with any slack in schedules now being in part removed by "bargain hunters" (Read as China). With China likely to be taking these bargain basement prices even allowing for 3 months + storage, one could end up with a imbalance in fleet locations. With Asia and China suddenly finding the finance to speculate...who would have thought it.
Common-sense prevails with oil heading to China and Asia to meet the main demand (and obtain sales) and reduction in fleet count giving the price advantage to the supplier (Price Setter). Fleet growth is almost nil this year globally which and unlikely to change. More compelling is what the US is going to do with all the light sweet crude, one suspects export it improving supply (oops).
The disparity being tanker and product/bulk freight rates couldn't be more contradictory at the moment (e.g. breakbulk, RoRo and container) as all non-crude rates are on the slide (reduced rates) and have been since 2013, down circa 30%, in 12 months). Even allowing for the cost of fuel tanking (scuse the pun), container rates are likely to dive further, with the competition for Asia to Europe intensifying. Remember only a handful of shipping firms managed to break even or make a modest profit in 2014. It would be wise to consider the Shanghai Containerized Freight Index rates and the implications for global deflation and growth.
One wonders how AP Moeller's share price will fair with increased pressure upon their rates. Its perverse that the Overseas Shipholding Group Inc. (OSGIQ) chapter 11 filings and issues are now resolved being weighted so heavily with near 40% crude oil tankers, ironically totallyabsence absent of Suezmax class. Could OSGIQ shareholders see some decent profit!?!...Anyone for cheaper Semi meaty pork riblets?
To the realities of the market with Copper (please don't call me Sherlock) performing exactlyhas expected even with the Chinese finding some cash for speculation. Amazing, China has been buying and the price falling. Does not bode well for wider demand with the Chinese accounting for circa 34-37% of the copper market currently. Are the improvements in energy consumption and technology reducing the reliance on commodities that were previously envisaged. It's noted that China has not responded and updated the world on their rare earths quotas, perhaps they're ignoring trade requirements and doing what they want.
What is disappointing is the lack of drive or potential that Glencore (GLEN) are seeing in the current climate. With opportunities presenting themselves all over the world, are GLEN only capable of purchasing their shares to improve shareholder returns. Lets face it it does not exactly set one alight with excitement when one looks at the return on shareholder funds. Perhaps management need to start thinking outside the box and applying these funds to projects that are less capital intensive, produce better returns and utilise the current weakness in commodities to acquire Tier 1 assets. A quick glance at the capital intensity of their trading divisions compared to the returns from producing a commodity win the argument hands down.
The sun rose today, and Majestic Wines Christmas update caused a tank! Now without sounding like a told you so...Majestic Wine Trading Update. Holy smoke, a competitive environment? Give over folks this was well-known about and Majestic seem surprised by this. What is worth considering is apart from the obvious competitiveness (read as margin erosion) you'll note the absent of positives in this years Christmas Statement compared to last years of no"treats of ""£20 a bottle + wines etc..." Majestic not failing in their long till Christmas and short on results...Here's my coverage of EMC Majestic Wine (no surprises) from November. Over to a certain party to state my negativity was unrealistic yet again...
The delay in my shipping posts was due to the kicking Boohoo.com decided to have earlier than I envisaged. Boohoo Trading Update. Pair of socks for those that can spot the obvious there...over to SuperGroup. The comedy statement of the day goes to Andy whom in some form of stupor thought Supergroup were delisting (wrong.) One assumes Andy was a major supporter of Majestics Christmas promotional activity and hasn't finished the cases yet!
Some positives for Weatherly International (WTI) Update on Progress at Tschudi Copper Mine Grid with Power Connected and Plant Ahead of Schedule. Will it be enough to stop the rot?
Limited time to cover Persimmon (PSN) trading update which has meant I have to return to the drawing board with some planned shorts!
Atb Fraser
Drilling slowdown begins in the US (Courtesy of FT & KempEnergy via Reuters). It's beyond doubt now that CAPEX has been slashed what there is no need to do is state the obvious so please see Kemp's chart where there's an obvious drop coming.
If one was to think back to the exploration for all minerals in 2012 the cycle is now set for oil and as such drilling rigs and associated services are under massive pressure (price taker). It does not bode well for those contractors and drilling operators, on the flip side, those listed entities that transport the product are likely to be in greater demand as tankers become in short supply for 2-3 years See FT Article: Tanker market benefits from oil rout Joel Lewin — London for part of the story, obviously here for the rest.
Some pertinent issues that have impacted on the shipping rates positively. Namely the weather in Black Sea, Mediterranean and Caribbean. In Summary Black Sea/Aegean Sea (Turkish Straits) delays were averaging 6-8 days the result being higher rates but not for all classes of shipping. The Gulf of Mexico has had greater than normal weather impacts on shipping setting back schedules and the glut of supply increasing shipping demand for petroleum tankers. Add in that speculation is coming in to play both for stockpiling for consumption and speculation to resell with any slack in schedules now being in part removed by "bargain hunters" (Read as China). With China likely to be taking these bargain basement prices even allowing for 3 months + storage, one could end up with a imbalance in fleet locations. With Asia and China suddenly finding the finance to speculate...who would have thought it.
Common-sense prevails with oil heading to China and Asia to meet the main demand (and obtain sales) and reduction in fleet count giving the price advantage to the supplier (Price Setter). Fleet growth is almost nil this year globally which and unlikely to change. More compelling is what the US is going to do with all the light sweet crude, one suspects export it improving supply (oops).
The disparity being tanker and product/bulk freight rates couldn't be more contradictory at the moment (e.g. breakbulk, RoRo and container) as all non-crude rates are on the slide (reduced rates) and have been since 2013, down circa 30%, in 12 months). Even allowing for the cost of fuel tanking (scuse the pun), container rates are likely to dive further, with the competition for Asia to Europe intensifying. Remember only a handful of shipping firms managed to break even or make a modest profit in 2014. It would be wise to consider the Shanghai Containerized Freight Index rates and the implications for global deflation and growth.
One wonders how AP Moeller's share price will fair with increased pressure upon their rates. Its perverse that the Overseas Shipholding Group Inc. (OSGIQ) chapter 11 filings and issues are now resolved being weighted so heavily with near 40% crude oil tankers, ironically totally
To the realities of the market with Copper (please don't call me Sherlock) performing exactly
What is disappointing is the lack of drive or potential that Glencore (GLEN) are seeing in the current climate. With opportunities presenting themselves all over the world, are GLEN only capable of purchasing their shares to improve shareholder returns. Lets face it it does not exactly set one alight with excitement when one looks at the return on shareholder funds. Perhaps management need to start thinking outside the box and applying these funds to projects that are less capital intensive, produce better returns and utilise the current weakness in commodities to acquire Tier 1 assets. A quick glance at the capital intensity of their trading divisions compared to the returns from producing a commodity win the argument hands down.
The sun rose today, and Majestic Wines Christmas update caused a tank! Now without sounding like a told you so...Majestic Wine Trading Update. Holy smoke, a competitive environment? Give over folks this was well-known about and Majestic seem surprised by this. What is worth considering is apart from the obvious competitiveness (read as margin erosion) you'll note the absent of positives in this years Christmas Statement compared to last years of no"treats of ""£20 a bottle + wines etc..." Majestic not failing in their long till Christmas and short on results...Here's my coverage of EMC Majestic Wine (no surprises) from November. Over to a certain party to state my negativity was unrealistic yet again...
The delay in my shipping posts was due to the kicking Boohoo.com decided to have earlier than I envisaged. Boohoo Trading Update. Pair of socks for those that can spot the obvious there...over to SuperGroup. The comedy statement of the day goes to Andy whom in some form of stupor thought Supergroup were delisting (wrong.) One assumes Andy was a major supporter of Majestics Christmas promotional activity and hasn't finished the cases yet!
Some positives for Weatherly International (WTI) Update on Progress at Tschudi Copper Mine Grid with Power Connected and Plant Ahead of Schedule. Will it be enough to stop the rot?
Limited time to cover Persimmon (PSN) trading update which has meant I have to return to the drawing board with some planned shorts!
Atb Fraser
good work F. 4% of global tanker fleet as storage in China at moment & increasing. Need to wait for futures to imrpove cheers Li
ReplyDeleteHat tip MJWMajestic Fraser going against the entire market is a brave call and perfect execution better than any scoop! Thank you for the lessons JR.
ReplyDelete