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Shipping Stocks Surging

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On "Fast Money" two of our favorite subjects are energy and the global economy - we think Overseas Shipholding Group (OSG) must find those topics pretty compelling too. They run a fleet of more than 100 tankers moving oil and natural gas around the world.

Here are excerpts from our conversation with Overseas Shipholding Group Chief Executive, Morten Arntzen.

Give us some insights about your business?

“We’re in the 4th inning of a 9 inning game,” replies Arntzen. “Gas, oil and petroleum are found one place and demand is in other (parts of the globe)… to move supplies you need big ships...”

He adds “we used to have single hull tankers (one bottom) – but after the Exxon Valdez incident legislation required double bottoms by 2010. So all those old ships had to be replaced.. 100% of our ships are double hull tankers and the world needs a lot more of them.”



Why wouldn’t an integrated oil company build their own fleet?

“A couple of them have been building up their fleets, but they find the demand for ships (is so great) that even if they wanted to build them they couldn’t,” replies Arntzen. “(And) I think they make more money on their core business (which is pumping oil). Also Exxon Valdez was costly...”

Eric Bolling adds the risk of an oil spill is too damaging for big oil.

Is more capacity coming online?

“There’s roughly as many supertankers on order as there are single hulls left,” says Arntzen.

Are your margins safe?

“We are in a very secure margin sector,” says Arntzen.

Can single hull tankers be refurbished to become double hull tankers?

“There are some smaller ones,” says Arntzen. “However very few companies will accept (a refurbished tanker). “What is happening that’s more attractive is that they’re taking them out of the tanker market and making them dry bulk carriers…They carry things like iron ore to China. That’s good for our business.”

Eric Bolling adds the company has 19 ships under construction in this country and 40 around the globe.

Everyone on the panel likes this stock.

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Trader disclosure: On July 16th 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders Macke Owns (ATVI), Bolling Owns (DIS), (ICE), (MPEL), (NMX), (T), (XOM), Corn; Bolling Is Short (FXI) And Owns (FXI) Puts; Finerman's Firm And Finerman Own (C ) (FTWR); Finerman's Firm Owns (KFT); (MO); (GLNG); S&P Puts; Russell 2000 Puts; (TGT) Calls, Finerman's Firm Is Short (IYR)