US Gulf positioning favors select product tankers
The bull case argued for specific product tanker companies is that their fleets are heavily weighted to the highly profitable Western Hemisphere (US Gulf to Latin America) routes, positioning them to beat consensus earnings estimates.
The argument
The guest argued that while analysts use average benchmark rates to model shipping earnings, tracking vessels individually reveals that certain companies have up to 70% of their medium-range (MR) fleets loading in the US Gulf. These routes have commanded massive premiums (over $100,000/day) compared to Pacific routes, which will lead to earnings beats and subsequent analyst upgrades.
The thesis, stress-tested
✓ What validates it
- ✓Earnings beats reported by INSW and TRMD driven by high realized spot rates
- ✓Sell-side analysts upgrading target prices as they adjust models for geographic rate differentials
▸ Risks discussed
- ▸Potential shift in geographic rate spreads as vessels reposition
- ▸Management capital allocation decisions (e.g., suspending buybacks or dividends)
- ▸Exposure to less profitable asset classes within mixed fleets (like VLCCs or LR2s)
Hear it yourself
"That would be like Scorpio tankers, ticker STNG, Tor, ticker TRMD, Hafnia, ticker HAFN. Those three are the the big MR owners, but you also have a company which some people like to refer to as the tanker ETF because they have both product and crude, and they own the big sizes and the small sizes."
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