TANKER owners are expected to report bumper fourth-quarter earnings, according to US investment bank Jefferies.

“Most crude and product players are set to showcase their highest quarterly earnings of 2022, as spot rates across most tanker segments continued to push upwards,” said equity analyst Omar Nokta in a report. “The strong market has been a game-changer for tanker owner balance sheets, as the average net loan-to-value ratio stands at just 22% for the group, down from 50% a year ago.”

He expects tanker companies to increase dividends or repurchase shares after healthy cash flow has boosted balance sheets.

Even as spot freight rates have eased into 2023, with very large crude carriers feeling the impact of reduced flows from the Middle East, fundamentals are firm, and China's re-opening should lend further support.

Product tanker rates are reeling from the impact of mild weather, reduced exports from the US Gulf, and a surge of European imports of Russian products ahead of next month's ban, which have come at the expense of those coming from longer-haul origins.

However, the market appears well-supported, especially as charterers remain "quite active" in seeking medium-term charter contracts in the three-year range. Meanwhile US Gulf refineries are ramping up activity after shutting in almost 3m barrels per day of capacity late last year due to severe weather.

In addition, a European Union ban on Russian cargoes should lead to higher tonne-miles, as the 1.5m bpd of Russian cargoes currently heading to Europe are set to be replaced with cargoes from the US Gulf, Middle East and increasingly China.

A similar picture can be seen in the gas carrier sector, while containers and bulkers are set for weaker results with further revisions downward for the first quarter.

As seasonal headwinds impact the dry bulk market, the ingredients for a recovery in the coming months are in place, Mr Nokta said. He added that judging by the stronger steel prices seen over the past two months, China's re-opening will lead to higher iron ore volumes and capesize demand.

But not all are in agreement about the potential on dry bulk from China's reopening following its zero-Covid policy.

Commodore Research & Consultancy's Jeffrey Landsberg is concerned about demand for houses in China.

“Reopening will remain the much easier of the two issues this year,” he said in a note. “China’s government has no choice but to do anything it can to stimulate the housing market again, but we continue to worry that China simply already has more homes than demand for homes.”

Even with low fleet growth — seen at 2.8%-3.2% this year, he does not expect an easy year for the dry bulk market. A lot will continue to depend on how quickly China reopens and how well the housing market is able to recover given weakness in other parts of the world.