For the second time within the space of a few weeks, the Swiss Federal Office for National Economic Supply (BWL) has sounded the alarm: after first doing so on 25 July, the organisation again reduced its compulsory stockpile of mineral oil products on 18 August. This means that the mandatory level of mineral oil stocks held in Switzerland may be undercut by 12.8%, or 490,000 cubic metres, by the end of September. The BWL is having to tap into the emergency reserve because practically no more petrol, diesel or heating oil was being delivered to Switzerland. “The long-lasting drought is causing the Rhine to fall to record levels, resulting in drastic reductions having to be made in cargo volumes,” the agency explains. The report shows just how important a functioning logistics system is in the energy market This is true not only on a national scale, but also and especially in the global context. Shipping tankers for the distribution of oil, gas and refined products play a central role alongside pipelines.
Fleet operators are correspondingly in demand on the stock market at the moment. The Leonteq Select Tankers Index has gained more than 90% in value over the course of the year to date (see chart). This benchmark includes companies which are actively involved in the global shipping industry. It is a fixed basket of seven stocks, all of which are listed on Wall Street. When it comes to performance, Scorpio Tankers stands out: the share price of the Monaco-based company has more than tripled so far in 2022. On its website, Scorpio Tankers describes itself as a “leading international provider in the transportation of refined petroleum products”. The fleet comprises 131 vessels, which are either wholly owned, leased or chartered. Scorpio made its début on the New York Stock Exchange less than one year after being founded in the Marshall Islands. The company has been able to underpin its most recent ascent with strong numbers: in the second quarter of 2022, turnover more than doubled on the first three months of the year to reach USDmn 405.07. Scorpio Tankers posted a bottom line of USDmn 191.1, after recording a loss in the first quarter.
The sharp rise in freight rates is what made the higher than expected interim figures possible. Scorpio, for instance, earned on average just under USD 42,000 a day on its tankers of the Handymax class. This compares with a TCE rate, as it is known, of less than USD 16,000 in the first quarter. The price recovery on the world's oceans runs like a red thread through the latest interim reports of the companies included in the Leonteq Select Tankers Index. DHT Holdings beat expectations for both sales and net earnings by a considerable margin. The Bermuda-based transport company posted a profit in the second quarter of 2022, for instance, despite the consensus from analysts that it would go into the red. DHT operates a fleet of 24 vessels of the VLCC category. On 30 June 2022, these supertankers accounted for a total USDbn 1.35 on the balance sheet.
Two members of the Leonteq Select Tankers Index are just in the process of merging to create an industry giant. In July, Frontline and Euronav reached agreement on the terms of a merger by exchange of shares. The group, which in the future will trade as Frontline, will operate 146 ships, just under half of which are large VLCC tankers. The owners expect the amalgamation to deliver synergies of at least USDmn 60 a year. Although the Euronav share is set to disappear from listings sooner or later, the Leonteq Select Tankers Index will continue to reflect the full operational strength of the two companies. A tracker certificate allows investors to bring this selection into their portfolio with immediate effect. Quoted on the SIX Swiss Exchange, the open-end product comes with an administration fee of 1.00% p.a. The underlying is calculated to include any dividend payments of the associated companies on a net basis.
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