- Red Sea reopening risks hit container and product tanker outlook.
- Russia-Ukraine peace talk rumours pressure crude and product tanker equities.
- Tariff unwind scenarios weigh on US–China trade-driven inefficiencies.
VLCC stocks took a step back as talks between Russia and Ukraine seemed to make some headway, even though the Breakwave Tanker Shipping ETF (BWET) saw a 24% jump thanks to strong FFA-linked VLCC rates. On the other hand, major VLCC players like Frontline, Okeanis Eco Tankers, and DHT held steady after last week’s dip, reports Lloyd’s List.
Shipping Stocks Take a Hit
Container liner stocks dipped amid hopes for a potential reopening of the Red Sea. Meanwhile, product tanker stocks experienced sharper declines since mid-November:
- Scorpio Tankers fell by 13%
- Torm dropped by 10%
- Hafnia decreased by 7%
Sector commentary has shifted from “disruptions boosting rates” to “fundamentals should hold even if disruptions ease.”
Russia–Ukraine War Impact
Despite strong spot rates, tanker equities remain pressured. As Jefferies analyst Omar Nokta wrote: “The key factor is whether Russian exports continue moving to Asia or return to Europe. A return to pre-war trade flows seems unlikely, but the uncertainty, for now, seems to be affecting sentiment.” Clarksons Securities analyst Frode Mørkedal noted: “Despite headlines about possible Russia-Ukraine peace talks and last week’s pressure on tanker equities, we do not see normalisation in trade flows or a lifting of sanctions as a near-term event.”
The disruptions have actually ramped up:
- Ukraine has been targeting tankers and terminals
- Russia is threatening retaliation
- Novorossiysk crude loadings have plummeted nearly 50% week-on-week
- Mainstream floating storage has surged to a 16-month high
- VLCC ballast numbers are sitting 20% below normal
Vortexa’s David Wech said: “I personally believe we’re not yet at the end of the curve and there is more to come down the line.”
Red Sea Route Outlook
Positive comments from Zim, the Suez Canal Authority, and Maersk revived expectations of a reopening. Danaos CFO Evangelos Chatzis said: “By ‘at some point’, I’m not referring to the distant future. I believe that in 2026, the Suez will normalise.” Boxship lessors are anticipating a gradual impact, with 10–12% of capacity expected to return, but this will be somewhat countered by:
- Slower vessel speeds
- Increased congestion at European ports
MPC Container Ships co-CEO Moritz Fuhrmann pointed out that this return will need careful planning due to the existing congestion. For product tankers, Hafnia’s Soren Winther argued the downside may be limited: “The Middle East will be a more competitive supplier into northwest Europe and the Mediterranean again, so there would be added volume coming back to the normal east-to-west volumes.”
US–China Tariff Shifts
The US–China détente reduced inefficiency premiums in VLGC and container trades.
BW LPG CEO Kristian Sorensen said: “Following the de-escalation of trade tension between the US and China, it’s reasonable to expect some unwinding of the inefficiencies in the global fleet.”
A recent US Supreme Court ruling against Trump’s tariff powers could give a short-term boost to importer sentiment and liner demand due to tariff refunds. However, significant tariffs are likely to stick around, ensuring that export diversification from China to markets like South America remains intact. Global Ship Lease CEO Thomas Lister summed up the shifting landscape: “The dynamic between China and the US has added an extra level of volatility and unpredictability… and I think liner operators see having capacity as having optionality.”
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Source: Lloyd’s List
