I've just experienced my Come To Jesus moment on product tankers, so here's a thread on why I think it's an idea.

The ideas aren't original but the source may be unfamiliar - a Danish company called Torm, it's a product tanker company and I'm long: we're both talking our book. https://twitter.com/hareng_rouge/status/1253400593319833606

Their last call was on March 11. At the time of speaking, they said that rates were at around $22,000 for their main class of ships.

It's hard for me to avoid seeing TC rates around on fintwit, so this was good opportunity to see if they check out.

Here's the daily update from @JHannisdahl for that date, March 11. Blue line on the chart and the blue shaded boxes: they're both close enough to the numbers discussed in the call.

https://twitter.com/JHannisdahl/status/1237821330537529344?s=20

Now here's @JHannisdahl yesterday. Up nearly fourfold.

Yes, it may be a short lived spike; I've been critical of shipping holders before wondering why the stocks don't work: the blue line tells you why.

Now the facts have changed: it's a hockey stick.

https://twitter.com/JHannisdahl/status/1253372349409382400?s=20

Take a step back. See in the white chart the anticipated reaction in Torm's price to IMO2020 (the big run in the middle of the black chart)

IMO fizzled, stocks' anticipation was mistaken. Again though, the facts - and the rates - have changed but the stocks are asleep.

You can stop here because my main argument is that, sure it may well prove to be a spike but unlike previously, it's not illusory but real - and the stocks have not reacted yet.

If you're interested, I'll mention why I think product rather than crude is the play here.

Torm's call again. TLDR: many ships switched from clean to dirty for various reasons and the clean fleet is back to 2015 levels - therefore, supply tightness

TLDR again: the issues with crude storage encourage ships to stay in that market - further supply tightness for product ships. Products are driven by imbalance more than crude.

Lastly, everything needs to fill up before ships start getting used: this doesn't happen until you see the whites of their eyes.

I'll finish with two pictures: 200 in EBITDA.

"Our case averaged TCE rate $16,526 p/day for the year. In the LR, achieved LR2 rates $19,730 p/day. Largest segment, the MRs, rates $15,840 p/day, and in the Handysize, achieved rates were $14,965 p/day"

Remember the hockey stick

And here's the sensitivity whilst you think of that 4x hockey stick.

The stocks have done little beyond a post-corona bounce and should be up more on spike in underlying rates alone.

If it's not a spike and the hockey stick hangs around for a while, then you can work it out..

It's time to come back