Lazard: No near term boost from tanker conversions

Lazard: No near term boost from tanker conversions Conversions of single-hull supertankers into ore carriers will not be a boon to the oil industry, says Urs Dur, a shipping analyst for Lazard Capital Market.
   “Our interviews with ship owners, ship brokers, ship managers, ship builders and charterers indicate that, contrary to conventional wisdom, tanker conversions over the next 24 months will provide only minimal support to the VLCC (very large crude carrier) and broader crude tanker markets.”
   Dur writes that the tanker market is “likely to get worse before it gets better. Crude fleet growth is projected to exceed crude tanker demand growth through 2011. With our updated crude tanker supply model, we lower our assumed crude tanker rates. VLCCs are oversupplied in the Arabian Gulf and broader spot crude charter rates have declined 34.5 percent over the past seven weeks and are at four-year lows. We expect a poor crude tanker spot market to persist through November, putting downward pressure on second-hand tanker values and tanker equities.”
   Dur said he was lowering estimates on tanker companies Teekay and Overseas Shipholding Group, but reiterating hold ratings, saying both companies “are well capitalized, have built in growth, are spinning off assets and have top managements. Although OSG and Teekay shares may weaken in the near term, we anticipate a rebound when the market improves,” which he said was possibly the first quarter of 2008.