This Ferengi rule #3 came to our mind when we looked at the development of the crude tanker stocks in the first two weeks of 2020. Crude tanker stocks and LPG Carrier were the top performers last year as shown in the graph below. Both sectors realized a sudden drop in TCE rates beginning this year which caused the stocks to fall sharply by 10% on average. Companies with higher exposure to the spot market reacted even more pronounced. 

From a seasonal point of view, crude tanker markets should have reached their highs, already. But from a fundamental point of view, the crude tanker market is supported by a low order book, a high season for scrubber retrofits and a potential increase in ton-miles after phase1 of the US-Sino trade deal seems concluded. We took the opportunity to raise the weighting of the sector in our portfolio, again.

The status of VLGC carriers looks similar. TCEs dropped significantly over the years' end despite a strong increase in the ARB between Asia and the US. Theoretically, the current ARB supports a Baltic LPG index of more than 90 index points. However, the index did not move and the rising fuel costs led to a drop in spot TCE rates. We took the opportunity to re-invest into the sector.

Last week, we finally saw the first upticks in the BLPG, showing a renewed interest for VLGCs. The orderbook is quite strong this year, but the EIA expects a strong increase in US exports, too. In its last Shipping Intelligence Weekly, Clarksons reports that there are no available VLGCs in Houston for the next four weeks which led the freight rates for Houston-Chiba to break through 130 USD/mt. The chance/risk ratio for the sector is not as good as it was last year but it's still comfortable in our view. 

We are more careful when it comes to Liners and Containers. Both sectors outperformed the broad shipping markets recently but we are not really convinced. Harpex and Contex are stabilizing on a higher plateau but they are not increasing, anymore. We are underweight in both sectors.

All-in-all we increased the market exposure in our portfolio to more than 50% and we begin to have a closer look at the bulker sector. Its relative momentum is still unfavorable and we need to be patient in order to obey Ferengi rule #3.

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