Chappell's Shipping Show: It's Better to Walk a High Wire With a Safety Net

Research evidence excerpt

Chappell's Shipping Show: It's Better to Walk a High Wire With a Safety Net

Transportation | Shipping

June 08, 2026

Chappell's Shipping Show: It's Better to

Jonathan Chappell, CFA

212-497-0827 Walk a High Wire With a Safety Net

jonathan.chappell@evercoreisi.com

Our last three editions of this weekly note have warned of an impending

newbuilding delivery boom (here), the false hope of a scrapping offset

(here), and the vast valuation discrepancies amid high-dividend paying

companies and those with more conservative capital allocation (here).

The key takeaway from these themes is that a supply bubble is building,

which typically ends in tears for the industry, with those stocks at

elevated valuations associated with record dividends most likely to feel

the brunt of a rate and multiple reversion (in-line with our industry views

and latest ratings changes – here). However, a tanker market reversion

from all-time (anomalous) highs will likely not have the same damaging

impact on equity values as in 2009, 2014, or 2021, and that is because

the capital structures across the publicly traded universe are much

stronger than at any time over the last 20 years. Figure 1 below shows

the average total debt-to-capital ratios of the 7 tanker stocks under our

coverage from 2006 through the end of this year (estimated). After

spending much of the pre-GFC boom years and post-GFC bust years

well above 50% (and often around the 60% threshold), deleveraging

has accelerated over the last 5 years, with the average ratio breaching

40% in 2022, 30% in 2024, and on its way to nearly 25% by the end of

this year. A relatively strong balance sheet does not fully protect against

equity depreciation in a downturn, especially for equities still up 35-61%