Catching the bottom in tanker values is never neat and tidy. Prices feel weak, sentiment is dark, and every chart looks flat. The real clue is not one perfect signal but a mix of earnings, asset prices, supply, and behavior that starts to shift at the same time. The guide below walks through those signals in plain language and gives you simple tools to test if your next tanker buy is still falling or starting to turn.
Core idea
You are not guessing a perfect bottom. You are looking for a cluster of signals that say downside is limited and odds of a tighter market are rising.
How to use this
Score each signal on a lane or segment. If most of them lean positive and your downside looks manageable, you size into the trade instead of going all in on one date.
The seven signal sets
1) Cycle phase 2) Asset yield 3) Spot vs period 4) Orderbook and scrapping 5) Yards and banks 6) Sale and purchase flow 7) Macro and rule shifts.
1) Read the cycle phase, not the last quote
Tanker values do not move in a straight line. They follow freight earnings with a lag and are shaped by how much steel is on order or headed for scrap. A simple cycle map keeps you from overreacting to a few bad weeks or chasing the last spike.
| Phase | Freight earnings | Asset values | Typical owner behavior |
|---|---|---|---|
| Late downturn | Below opex on average, occasional spikes | Sliding, forced sales appear | Banks press weak names, little ordering, some distress |
| Early recovery | Back above opex, more firm periods of strength | Stop falling, firm on real bids | First buyers quietly add units, orderbook still low |
| Mid upcycle | Most voyages strongly profitable | Climbing fast, new benchmarks set | Ordering returns, more equity money enters |
| Late upcycle | Very strong but choppy, more volatility | High, sometimes stretched vs earnings | Heavy ordering, sellers have pricing power |
True bottoms usually show late downturn freight with early recovery behavior. Earnings are still low on average, but values stop falling on real bids and forced sellers clear out.
2) Check the unlevered yield on the steel
Instead of arguing about whether a price feels cheap, turn it into a simple yield. Compare cash flow from likely earnings to the price you pay for the hull. If the unlevered yield looks high against history while supply is tight, you might be near a turning point.
- Purchase price for the tanker
- Expected TCE per day over a full year
- Opex per day and off hire days
- Reasonable utilization, not the best month
Quick check on one candidate ship.
Unlevered cash yield: 0%
Rough guide: single digits are rich, mid teens are reasonable, above that is often a sign values have lagged earnings.
3) Compare spot, period, and forward curves
When values are near a turn, you often see a mismatch between spot earnings, period employment, and what forward curves imply. Owners and charterers show their real view of the future through the term prices they accept, not through comments.
- Spot weak but one year TC rates hold up or even rise.
- Time charters include profit share or options priced by owners, not charterers.
- Forward freight or fuel curves imply better net returns than the last few months.
Check how far period rates sit above or below recent spot averages.
TC premium or discount: 0
A strong and steady premium can mean charterers are more bullish on the next year than the last quarter looks on paper.
4) Line up the orderbook and scrapping pressure
Values do not usually turn higher if new supply is flooding in. A low orderbook, older fleet, and rising scrap prices help put a floor under values. The mix by segment also matters, since an overbuilt size can drag on prices even if your own ship looks cheap.
| Signal | What to look for | Interpretation |
|---|---|---|
| Orderbook as percent of fleet | Segment orderbook below long run average and falling | Limits future supply, helps a value floor form |
| Age profile | Large share of ships past 15 or 20 years | Scrap and replacement cycles start to matter more |
| Scrap price trend | Steel prices firm or rising from low levels | Encourages recycling and supports residual values |
- Orderbook percent for your segment and basin.
- Number of ships above 20 years in your segment.
- Recent scrap sales and price per light displacement ton.
Enter rough percentages to score the backdrop.
Supply pressure: Neutral
Low orderbook and older fleet can support a value turn when earnings improve.
5) Listen to the yards and the banks
Newbuilding prices, slot availability, and loan terms are a slow but powerful signal. When yards are chasing business and banks are conservative, asset values often sit near the lower end of the range. When both push back on terms, the turn may already be well advanced.
- Short lead times and flexible specs hint at slack capacity.
- Discounts or soft pricing for repeat clients suggest weak order flow.
- Long queues and firm prices suggest confidence and strong demand.
- Higher margins and low loan to value reflect caution.
- Willingness to finance secondhand tonnage at higher leverage points to comfort on values.
- Speed of credit approvals often tracks risk appetite.
Score how friendly funding looks for your deal.
Financing tone: Balanced
Very low leverage and high margin can show stress. Reasonable leverage on secondhand tonnage often appears near value turns.
6) Watch how secondhand tonnage actually trades
The sale and purchase market shows the real clearing price for risk. Thin bid lists, frequent failed inspections, and long marketing periods suggest values are still soft. More bidders, quicker recaps, and repeat buyers in a segment often show that confidence is coming back.
| Market feel | Observed behavior | Hint for values |
|---|---|---|
| Weak and illiquid | Few inspections, price cuts, repeat marketing | Bottom may not be in, or earnings are not trusted yet |
| Bottom forming | Several bidders at similar levels, fewer failed deals | Prices stop falling even when news is still mixed |
| Firm and busy | Quick recaps, some outbids, private deals increase | Turn likely passed, values already reacting to earnings |
Count how many comparable ships changed hands in the last 3 to 6 months, then compare to a quieter period. Rising volumes at stable or slightly higher prices are often more reliable than any single headline sale.
7) Overlay macro and rule changes that hit tankers first
Large shifts in trade flows, refinery runs, or rules can change ton miles and effective supply without any new hull entering or leaving the fleet. These shifts do not set the exact bottom, but they explain why a turn can be stronger or weaker than the last cycle.
- Refinery relocation from one region to another.
- Shifts in export bans or taxes that redirect flows.
- Changes in long haul trades, such as Atlantic to Asia or vice versa.
- Carbon and fuel rules that penalize older or less efficient tonnage.
- Sanctions or insurance limits that shrink the usable fleet.
- Port state or vetting rules that push older ships into fringe trades.
A very rough way to frame a shift in flows.
Ton mile change: 0%
A larger positive change supports higher earnings for the same fleet size.
Putting the signals together for a bottom buying plan
No single indicator calls the exact bottom. The edge comes from lining them up and asking whether the downside looks limited against the upside you see from a tighter market and healthier fleet balance.
- Place your segment in the cycle table.
- Run the unlevered yield and compare to history.
- Check spot, period, and curves for the next year.
- Score supply using orderbook, age, and scrap.
- Listen to yards, banks, and S and P brokers.
- Overlay macro and rule shifts that change ton miles.
- Size into positions in stages instead of all at once.
Count how many of the seven areas lean in your favor.
Overall backdrop: Constructive
As a rough guide, 0 to 2 positive is weak, 3 to 4 mixed, 5 to 7 constructive for careful bottom buying.
You do not need to catch the exact bottom in order to make a good tanker investment. What matters is buying into a segment where earnings, supply, finance, and trade flows line up in your favor and your downside looks limited against the potential upside. If several of these signals move your way and your yield checks out, you can step in gradually, adjust as new information comes in, and give yourself a better chance of a clean and disciplined result.
