OREANDA-NEWS. July 17, 2013. China’s car sales are a leading indicator of oil imports. When car sales rise, car use will rise, which in turn drives oil consumption. As China’s oil demand is the most significant contributor to oil trade, a slight change in the country’s oil demand has a significant impact on tanker rates that are used to haul crude oil across sea.

Automobile sales remain strong
During May 2013, automobile sales in China fell to 1.76 million units from 1.84 in April, according to China Automotive Information Net. On a year-over-year basis, sales rose by 9.60% (154,000 units). Investors look at year-over-year data because car sales can be seasonal, just like clothing.

However, year-over-year data, using a single month can still be volatile due to statistical noise. Thus, a year-over-year growth rate, using the last six months of data, was used to smooth the data points out. Based on information available from China Automotive Information Net, year-over-year growth rose to 11.53% in May, which was higher than April’s 9.99%.

Higher oil import to support tankers

While oil import growth fell to a negative 0.41% in May; based on the last six months of data, oil imports should grow at a faster rate in the near future if car sales can stay at current levels. If oil import has fallen due to lower economic activity or high inventory, any reversal of the trends, in addition to the fact that there are more cars on the road now, would boost oil import. Even if economic activity does not kick into a higher gear, the market has started to price in China’s lower economic growth.

This would be positive for shipping rates in the long-term and benefit tanker firms, such as Teekay Corp. (TK), Tsakos Energy Navigation Ltd. (TNP), Ship Finance International Ltd. (SFL), Teekay Tankers Ltd. (TNK), Nordic American Tankers Ltd. (NAT) and Frontline Ltd. (FRO), as well as the Guggenheim Shipping ETF (SEA).