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Teekay to Euronav Win as Iraq Oil to EU Fills Iran Void: Freight

06 Feb 2013

Oil tankers designed to navigateEgypt’s Suez Canal are getting the most cargoes in at least three years as Iraq fills a void left when the European Union halted crude imports from Iran in July.

Northbound shipments on Suezmaxes climbed 36 percent to 31 a month last year, the highest tally since at least 2009, as Iraqi output grew, data compiled by Bloomberg show. Rates for the vessels carrying 1 million barrels each will rise 14 percent to $17,000 a day this year, Morgan Stanley estimates. The cargoes benefit owners from Teekay Tankers Ltd. to Euronav NV (EURN), which together control more than 10 percent of the global fleet.

Europe’s embargo stopped shipments dependent on Iran’s own tankers that were too big to navigate the canal and needed to discharge cargo into an adjacent pipeline. Growing imports fromIraq, which doesn’t have its own fleet, are spurring demand for the smaller Suezmaxes at a time when OPEC is making the deepest output cuts since the 2008 global recession. Only three ports in Europe regularly receive the biggest vessels.

“There is a lot of substitution of Iranian oil with Iraqi and that’s good because Iran had its own fleet and Iraq has no ships,” said Odysseas Valatsas, chartering manager of Dynacom Tankers Management Ltd., a closely held Athens-based owner whose fleet includes 25 Suezmaxes. “They are also sending more direct to ports using Suezmaxes than Iran ever did.”

Lower Expenses

Oil companies favor Suezmaxes because they cost about 33 percent less than the bigger vessels for journeys to Europe. Shipping a barrel of Persian Gulf oil to the Mediterranean on a Suezmax costs $1.27, compared with $1.91 on a very large crude carrier, or VLCC, as the bigger tankers are known, data compiled by Bloomberg show.

Shares of Teekay Tankers (TNK) will rally 25 percent in the next 12 months, the average of five analyst estimates compiled by Bloomberg shows. The Hamilton, Bermuda-based company, a unit of the world’s largest publicly traded owner of Suezmaxes and operator of 25 of the tankers, is down 2.4 percent this year to $2.83 on the New York Stock Exchange.

Euronav, based in Antwerp, Belgium, and the third-largest owner among publicly listed companies with 23 Suezmaxes, is forecast to gain 14 percent in the next year, according to data compiled by Bloomberg. The stock has dropped 3.7 percent in 2013 to 4.42 euros in Brussels trading. Trading was halted until 5 p.m. today as the company offers holders of convertible bondsdue in 2015 the chance to extend the maturity by three years.

Biggest Shipbroker

Hamilton, Bermuda-based Nordic American Tankers Ltd. (NAT) is the second-largest owner of the ships, according to Clarkson Plc (CKN), the world’s biggest shipbroker.

Euronav’s net loss will narrow to $53.1 million this year, from $85.9 million in 2012, according to the average of six analyst estimates. Teekay Tankers will lose $15.7 million this year, narrowing to $5.4 million in 2014, eight estimates show.

“The biggest increase in the northbound cargoes is Basra from Iraq replacing Iranian crude,” Teekay Tankers’ Chief Excutive Officer Bruce Chan said in a telephone interview fromVancouver on Jan. 30. Suezmaxes are sometimes hauling Iraq’s oil as far as the U.S. Gulf, driving up average distances and so-called ton-mile demand, he said.

Oil output from Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, climbed 16 percent in the past year as the nation rebuilt after more than three decades of wars and sanctions. Iran’s production plunged 18 percent to 2.6 million barrels a day since Europe’s ban began in July, data compiled by Bloomberg show.