Suez Canal Opportunities - Due Diligence (DD) - $NAT $TK $STNG $FRO
Updated: Apr 27, 2021
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Created / inspired by /u/TimThyTurtle HypeEquity NOTE: This is a DD regarding opportunities as a result of this disaster
Vital shipping line Suez Canal is currently blocked by a cargo ship. As a result, a supply and demand crisis is forming which may require additional ships built.
>>Please note<< if this blockage is fixed quickly, the following analysis may be overblown.
>>UPDATE: the ship is partially unstuck<<
All of the following stocks have Positive and Increasing Sentiment Trends
Potential Opportunities (at time of posting)
Suez Canal Tanker Play | $NAT $TK $STNG $FRO
created by /u/TimThyTurtle
The Suez Canal blockage has lead to a surge in tanker rates and it’ll continue to rise the longer the ship remains stuck. They are already rerouting ships around Africa which signals the blockage could last weeks and with shipping as tight as it already is, the rates are going to skyrocket and kick start a new supercycle.
I was bullish on tankers even before the Suez Canal and I have been seeing great gains these past 3 months. The Tanker industry was already seeing a huge recovery across the board and now its being boosted even further by the Suez Canal disruption. CEOs and insiders, specifically $STNG and $NAT, are already buying stock/call options.
They are all also trading below their net asset value with strong fundamental cash positions from the huge rate spike in Q1 and Q2 2020.
The tanker/shipping market is inherently cyclical and hinges totally on supply and demand. Back in the super cycle of 2000-2007 companies were over building tanker ships while oil demand couldn’t keep up, so we had a lot of supply with not enough demand causing a 15 year bear market.
The 15 year market is incredibly important for product tankers specifically as the major players in the industry stop chartering ships over 15 years old so they are essentially off the market and will soon be scrapped.
The ship orderbook has been as low as its ever been and it has been low the past 15 years so we are seeing a small amount of ships being built but a large amount of ships passing the 15 years and no longer being used.
So what we have here is a massive supply/demand imbalance waiting to happen and now with the Suez Canal putting even tighter strain, if the ships have to all be rerouted around Africa increasing the amount of miles drastically then tankers/shipping are going to be the hottest sector in the market.
Back in 1956 when the Suez Canal was closed by Egypt and ships had to go around Africa, Tanker owners saw a supercycle as there was so much demand but not enough tankers allowing them to charge whatever price and they all made off like bandits. A similar situation is playing out as ships are already being rerouted around Africa now. I think this could be the black swan event that kicks off a supercycle for the entire shipping industry.
My current positions are in calls, mostly in $STNG to play product tankers and $TNK to play crude.
$20 STNG 7/16 2021 $15 TNK 5/15 2021 And I have some yolo $4 NAT 4/16 calls
From 2000-2021, 2687 vessels were built (MR, LR1, LR2) and 1251 of those vessels were built from 2000-2006 so roughly 47% of the global product tanker fleet will have passed that 15 year mark this year.
The supply side of product tankers is dwindling fast while demand is still rising, its simple supply and demand. But now with the Suez Canal blockage, the supply is only getting more and more constrained.