Tanker Market in the Doldrums

By Greg Trauthwein
Thursday, June 23, 2011

The global tanker market is depressed, it appears that there is little hope that it will recover for at least two years, according to a panel of expert speaking yesterday at a MarineMoney event in New York City.
“What a difference a year makes,” said Jonathan B. Chappell, Managing Director- Research, Evercore Partners, Inc., and the moderator of the panel dubbed “Oil Tankers: Challenges and Opportunities Beyond Supply & Demand.”
“Last year everyone was slapping each other on the back, but I don’t think there is any doubt where we are today; we are in a trough,” Chappell said.
The global shipping markets are historically cyclical and difficult to predict, even for seasoned veterans, and there was no consensus on when a full recovery would come about, though generally it seems 12 to 36 months is a popular line of thought.
“The easy answer is: ‘rates are down and there are too many ships,’” said Jan Andersen, Head of Shipping, ST Shipping and Transport Pte. Ltd.
Theories abound as to why the tanker market remains in the doldrums despite strong demand, particularly in developing markets. When the world economy took a dive in 2008, a large number of VLCCs were used to simply store oil, waiting for more favorable rates to return. The market has now fully absorbed most of this tonnage back into the pipeline.
“Floating storage took VLCCs out of the market and sent false signals to the market,” said Michael Reardon, Manager Global Strategy and Freight Traiding, ConocoPhillips. “We are at or near the bottom; things can get worse, but not much worse.”
Another factor keeping rates low is the relatively young age of the fleet, with many new ships still in the pipeline for delivery, and the dearth of scrapping activity.
While most of the panelists agreed that the demand for quality tonnage will mean the traditional 25-year lifecycle of a tanker is a thing of past, accelerating the scrapping of younger tonnage, they concur that scrapping alone will not bring rates back, rather they called for discipline among shipowners to not order new ships anytime soon. “There will have to be discipline going forward, as everyone has to watch their cash flow,” said Andersen.
Jeffry D. Pribor, Executive VP & CFO, General Maritime, put it succinctly: “Please, let’s not add any more vessels.”

Opportunities?
While the outlook is grim, the coming months present tanker owner/operators the opportunity to get their collective financial house in order, and the stronger companies will have the opportunity to pick up some ships, perhaps even an entire company, at vastly reduced rates.
“In the next 12 to 18 months you must make your business as efficient as possible,” said Andersen. He said a number of costs are rising, from general maintenance to insurance costs to bunker costs, while rates remain flat. “Eventually this downturn will present opportunities, whether it is buying ships or companies cheap.”

Maritime Reporter August 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Tanker Trends

Steel Cut for Yamal LNG Project’s Lead Tanker

A steel-cutting ceremony was held on September 29 for the lead gas tanker ordered by SCF Group for transportation of liquefied natural gas (LNG) under the Yamal LNG project.

GasLog Closes First Option Vessels Dropdown

GasLog Ltd.  announced today the closing of the sale of two modern liquefied natural gas (“LNG”) carriers, the Methane Jane Elizabeth and Methane Rita Andrea,

Cove Point LNG Export Facility Gets US FERC Approval

U.S. federal regulators on Monday approved construction of Dominion Resources Inc's liquefied natural gas export project in Cove Point, Maryland. Cove Point is the fourth U.

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Naval Architecture Pod Propulsion Salvage Ship Electronics Ship Repair Ship Simulators Shipbuilding / Vessel Construction
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1052 sec (10 req/sec)