Tankship Market Analysts Say Timing Essential for Success

MarineLink.com
Sunday, February 16, 2014
Figure 2 ABC scenarios: Image courtesy of McQuilling Services

Marine transport advisors McQuilling Services explain in a tanker industry note that timing is everything in a volatile tanker market.

McQuilling explain that on the outset, one might not directly see a similarity between Valentine’s Day and the tanker market; however, both can sometimes require serendipitous timing in order for desired outcomes to transpire.  Furthermore, just like the dating world, the tanker market is full of volatility.  Industry participants have been reminded of these market swings thus far in 2014 as the market witnessed its biggest spike in the last five years before losing steam at the beginning of this month.  This volatility has been particularly prevalent in the VLCC and Suezmax tanker classes, but also visible in the Aframax and Panamax segments (Figure 1, below).


The upward momentum was supported by the usual combination of elevated regional demand against a tighter supply of vessels.  Some additional support might have come from vetting restrictions imposed by certain charterers as well as weather related delays in several ports around the globe, that limited tonnage supply.
 
Regardless of the factors that helped tighten tonnage availability, the timing that an owner fixed their vessel in the trajectory of the uptick will have a significant impact on their bottom line. While this might seem relatively obvious, it sets the stage for some owners to feel a long awaited respite from the pressured market of previous years, while missing the upturn could even force some players to throw in the towel.
 
In an effort to highlight these market conditions, we examined three different Suezmax tankers and their timing related to the recently ended market cycle.  Naturally, the breakdown of the voyages varied for each vessel but ultimately they all sailed from the Atlantic Basin to a discharge port in the East.  All vessels eventually repositioned to Diego Garcia in the Indian Ocean.  This is a common destination for Suezmax owners to reposition following voyages to the East, as it provides for a relatively centralized point to assess rates in both West Africa and the Middle East.  In each of the three examples we examined their return over a period of 90 days which entailed ballast and laden legs, port time, waiting time and weather delays.
 
The three scenarios are as follows.  Vessel A entered the market at the start of the cycle earning US $19,500/day, Vessel B entered it halfway bringing in US $43,000/day and Vessel C was fixed at the peak at US $68,000/day (see Figure 2 to the right).
 
Although there were significant earnings variations for each of these Suezmax owners, they were all able to outperform the market actuals of 2013, which averaged about US $12,000/day (Figure 2).  In addition to the upswing in spot rates, owners were able to further maximize earnings through optimal vessel utilization that minimized ballast legs. To illustrate how these voyages might impact the annual earnings of these vessels, we assume that for the balance of the year, earnings will be around US $8,900/day (see Figure 2 on the right).  This is based on the weighted average of Suezmax (WAF/USAC & BSea/Med) earnings in our 2014-2018 Tanker Market Outlook.  This figure is based on round trip voyages, with a sailing speed of 13.5 knots, and has been adjusted to reflect current bunker prices.
 
Based on these assumptions, Vessels A, B and C will outperform the market forecast by US $10,500/day, $34,000/day and $59,000/day, respectively.  This provides an example of how timing can have such a positive impact on earnings, and illustrates how savvy (or lucky) owners can capitalize on unbalanced market fundamentals.
 
Although McQuilling Services anticipates that 2014 is unlikely to see a drastic improvement in rates due to the continued abundance of tonnage, several factors point to increased volatility in the markets.  A recovering world economy should result in more demand to transport oil.  The North American shale story is still developing, meaning that traditional trading patterns are far from certain.  Segmented supply due to charterers vetting requirements/age restrictions may also introduce short-term tonnage supply disruptions.
 
At present, the potential for another super spike seems unlikely, but admittedly it is hard to accurately predict weather delays, end of year inventory clear-outs and supply disruptions all transpiring in unison.  However, we could still see spikes that will drastically improve the results of a few owners throughout the year.
 
Furthermore, given the recent uptick in VLCC rates compared to the downward spiral in Suezmax earnings, substitutions will likely to be the order of the day in the near future, especially on large vessels, and that will keep earnings in check.
 
The take-away from these observations is for both owners and charterers alike to keep a weathered eye on the market, perhaps more so than last year as rate volatility may be returning.  In closing, on this Valentine’s Day, remember that in shipping, as in matters of the heart, timing can be everything.

In addition, video from McQuilling
McQuilling TV, Senior Shipping/Energy Advisor, Chris Neumiller, discusses some of the highlights from the tanker market in 2013 as well as McQuilling Services' view of tanker market fundamentals for 2014-2018.

Watch here:
http://www.youtube.com/watch?v=88_SwXppf1A
https://www.mcquilling.com/blog/tv/latest.html

Source: McQuilling Services LLC

 

 

 

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

People & Company News

Aberdeen Harbour Installs Siklu Security Network

Aberdeen Harbour has extended its security solutions coverage using high-capacity backhaul from Siklu, the market leader in millimeter wave backhaul informs the Israel-based tech firm.

Transocean's Chairman Designate 2015 Named

Transocean Ltd. informs that at its recent Extraordinary General Meeting Merrill A. "Pete" Miller, Jr. was nominated as a director and the Board intends to designate him as vice-chairman,

Chariot Oil & Gas 1H 2014 Interim Results

Chariot Oil & Gas Announce Interim Results for 1H 2014 Chariot Oil & Gas Limited, the Atlantic margins focused oil and gas exploration company, today announces

Contracts

Swiftships Shipbuilding Awarded Iraqi Navy Support Contract

The US Department of Defense informs that Swiftships Shipbuilding, L.L.C., Morgan City, Louisiana, is being awarded an $18,000,000 not-to-exceed contract for the

Aberdeen Harbour Installs Siklu Security Network

Aberdeen Harbour has extended its security solutions coverage using high-capacity backhaul from Siklu, the market leader in millimeter wave backhaul informs the Israel-based tech firm.

Salamander to Start Drilling in G4/50, Gulf of Thailand

Salamander announces that its Environmental Impact Assessment (“EIA”) for exploration drilling in the G4/50 licence, Greater Bualuang area, Gulf of Thailand, has been granted conditional approval.

Tanker Trends

Navios Charters Out Newbuild MR2 Product Tanker

Navios Maritime Acquisition Corporation (Navios Acquisition), an owner and operator of tanker vessels, announced that the Nave Luminosity, a newbuilding MR2 product tanker of 49,

Ingram Barge Order 20 Tank Barges for 2015

Ingram Barge Company say they will be building 20 tank barges in 2015 to meet growing demand for chemical shipments. While most of the company’s recent tank barges have come through acquisitions,

Finland Grants Support to Three Small LNG Terminals

The Finnish government granted 65.2 million euros (84.22 million US dollar) in subsidies to build three small liquefied natural gas (LNG) terminals to cut on use

Finance

Chariot Oil & Gas 1H 2014 Interim Results

Chariot Oil & Gas Announce Interim Results for 1H 2014 Chariot Oil & Gas Limited, the Atlantic margins focused oil and gas exploration company, today announces

Sir Frank Chapman Appointed Golar's Chairman

Golar LNG Limited announced that with effect from September 19, 2014, Sir Frank Joseph Chapman has been appointed to the Board of Directors of the Company and will act as the Company's Chairman.

TOTE, Saltchuk Secure Financing for Marlin Class Vessels

Maritime Administration to Provide Title XI Loan Guarantee for World’s First LNG Containerships Today, the U.S. Maritime Administration (MARAD) announced a $324.

Consulting

MN 100: Alternative Marine Technologies LLC

62 Southfield Road, Suite 214 Stamford CT. 06902 Website: www.alternativemarinetech.com E-Mail: rkunkel4@gmail.com President / CEO: Robert Kunkel Number of

Specialised Reefer Container Operators can Thrive: DMR

Despite growing competition from container lines, specialised reefer operators can still thrive, according to Drewry’s latest Reefer Shipping Market Annual Review & Forecast,

Teleperformance Commended by Frost & Sullivan

Based on its recent analysis of the Latin American contact center outsourcing services market, Frost & Sullivan recognizes Teleperformance with the 2014 Latin America

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Naval Architecture Offshore Oil Pipelines Pod Propulsion Port Authority Sonar Winch
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: 0.2353 sec (4 req/sec)