China Merchants Energy Shipping (601872.SS): Bullish on VLCC TCE with Strong Momentum to Regain
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At Goldman Sachs's Asia-Pacific Consumer and Leisure Corporate Day, China Merchants Energy Shipping's management argued that the market is overestimating dry bulk freight rates while underestimating tanker rates. Management expressed a bullish outlook for VLCC Time Charter Equivalent (TCE), guiding an average of 70,000 USD/day for fiscal year 2026, up from 50,000 USD/day in 2025.
The recent pullback in VLCC TD3C TCE to 29,000 USD/day as of January 2, 2026, down 79% from its November peak of 141,000 USD/day, was attributed to reduced floating storage, a temporary slowdown in Chinese state-owned enterprise restocking, and lower Russian crude flows to India. Management expects TCE to bottom out imminently and regain strong momentum post-Lunar New Year as restocking resumes.
Management dismissed concerns over the shadow fleet's return, noting over 60% of these vessels are over 20 years old with high safety risks. Any lifting of sanctions on Russian, Iranian, or Venezuelan oil would benefit the mainstream fleet. The company guided 2026 net profit to improve to 7-9 billion RMB, maintaining a 40% dividend payout ratio for fiscal year 2025. The stock remains not covered by Goldman Sachs.