Tanker Market 2014 Foundations Shaky Say Analysts

Tuesday, February 11, 2014
Tanker contracting 2004-13: Diagram courtesy of McQuilling Services

Marine transport advisors McQuilling Services have published 'Tanker Market Highlights', a note touching on the foundation upon which the 2014 tanker market rests, as follows:

Looking at the global economy, although markets seemingly having a hard time digesting recent moves by the US Fed to scale back its bond purchasing program, a recovery appears to be on the horizon.  One notable difference when compared to recent years has been that OECD economies, in particular the US, comprises a larger contribution to this development.  This has been spurred by reduced energy costs on the back of the US oil boom which has been helping to reign in the unemployment level.  However, despite this, non-OECD economies are projected to post the most robust growth levels through 2014 and 2015.
Our trade data showed that between 2012 and 2013, global ton-mile demand (CPP & DPP) increased by roughly 2% (Figure 1 below). This development was primarily supported by clean product trade, which saw overall ton-mile demand rise by 3%.

Looking at tankers that transport crude and residual fuels, total ton-mile demand rose by just over 1% year-on-year.  In addition to global economic concerns, a primary pressure on crude and residual tankers throughout 2013 was heavy refinery maintenance, especially at the start of the year, which reduced feedstock demand.  This seasonal market factor was further exacerbated as European refiners continued to struggle from reduced margins while problems with the Motiva refinery in the US pressured AG import volumes.  Although the oil production boom in the US oil has all but eroded its imports of light sweet crude oils, longer sailing distances to markets east of Suez provided support to ton-mile demand originating in West Africa.  In terms of the ton-mile demand, lower freight rates, which were spurred by over tonnage in the sector, supported a 6% rise in Suezmax ton-mile demand.
As we move into the current forecast period, we expect that ton-mile demand for crude and residual product tankers will rise by a relatively low 0.75% on an annual average.

Turning to clean product tankers, trades originating in the US continued to post higher outflows particularly to Europe, the Caribbean, South America and increasingly, Africa.  While the MR2 fleet transported the majority of clean trade volumes, we continued to see a migration towards the larger LR fleet.  Ton-mile demand on both LR2 and LR1 vessels increased by 7% while MR2 demand climbed by a lower 3%.  At present, we expect ton-mile demand for clean petroleum tankers will rise by a relatively higher annual average of 1% during the forecast period.

Contracting activity was robust in 2013.  Throughout the year, orders were placed for 392 tankers above 27,500 dwt.  This was the highest level since 2007 when 394 were ordered (Figure 2).  Roughly 55% of these orders were for MR2 vessels bringing orders for this class to a total of 350 since 2011.  Orders for other clean tonnage were also healthy, a testament of where market participants’ optimism rests (see diagram on the right).

This activity continues to cement our belief that starting in 2015 and 2016, clean tonnage will come under pressure.  Turning to dirty tankers, a strong 41 VLCCs were ordered, with about 30% of these in 4Q 2013.  While some of these vessels are unlikely to exit yards, the ordering activity highlights how sentiment can quickly trump history.
In the process of preparing for this year’s tanker market outlook, we continued to boost collaboration with our clients and other market participants.  This provided us with greater insight to trade flows, in particular for clean products, and further product movements.  This information was incorporated into our demand engine, providing broader criteria for analysis.
As we begin the forecast period we realize that the global fleet is unbalanced, as observed by the recent swings in the market.  However, despite strong performances in some sectors, the quick correction has reminded us of the abundance of tonnage.

Throughout recent years, this excess tonnage capacity has been mitigated by owners opting to slow steam in the face of rising bunker costs, but an improvement in earnings could cause some owners to push the throttle forward and exacerbate the situation.  Until owners opt to dispose of older tonnage, or stricter age limits are imposed through charterers, port restrictions or vetting procedures, fleet levels will remain a concern and improvements in spot rates are likely to be limited.


Maritime Today

The Maritime Industry's original and most viewed E-News Service

Maritime Reporter November 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Henriksen Unveils Strongest SOLAS Boat Lifting Hook

H Henriksen of Norway has received SOLAS certification for a new off-load single-point boat lifting hook capable of holding up to 22.5-tonnes. The quick release

S&P Raises Steamship Mutual outlook to Positive

Poor’s has revised its outlook on Steamship Mutual to Positive from Stable. The A- financial strength rating has been reaffirmed. In their announcement Standard

SSA Welcomes Decision To Extend BEO

The Singapore Shipping Association (SSA) has welcomed the decision by Singapore’s Minister for Trade and Industry to extend the Competition (Block Exemption

Tanker Trends

Idling Fleet Continues to Surge

Owners are rapidly laying up containerships as the market slows. The size of the idle fleet will get bigger while rates and profits slide, says Drewry Shipping Consultants Limited.

Egypt to Complete East Port Said Side Channel in 2016

Egypt plans to complete a side channel in East Port Said, near the Suez Canal, that would speed up shipping and allow ships direct entry into the port by the end of June 2016,

Concordia Maritime Charters MR Tanker

Concordia Maritime has signed a contract for the charter of an IMO2/3 class MR tanker, the company announced today. The vessel will be chartered jointly with Stena Weco,


S&P Raises Steamship Mutual outlook to Positive

Poor’s has revised its outlook on Steamship Mutual to Positive from Stable. The A- financial strength rating has been reaffirmed. In their announcement Standard

Norwegian Escape with Biggest Scrubbers sets Sail

On a sunny October day in the German harbor-town of Hamburg, M/V Norwegian Escape, a brand new cruise ship, sets sail for the first time. On board are five Yara SOx scrubbers – one for each engine.

ZIM Integrated Shipping Remains Profitable

Despite challenging market environment with freight rates reaching historic lows in several key trades,  ZIM Integrated Shipping Services continues to outperform


S&P Raises Steamship Mutual outlook to Positive

Poor’s has revised its outlook on Steamship Mutual to Positive from Stable. The A- financial strength rating has been reaffirmed. In their announcement Standard

Evoqua, Drew Marine Ink BWMS Deal

Evoqua Water Technologies and maritime solutions and logistics expert, Drew Marine, have announced a partnership to provide a full compliance package for ballast water management.

Need to Monitory Coal from Indonesia - UK P&I

There are various hazards associated with the trade in coal. UK P&I Club’s Loss Prevention Team highlights the risks involved, and advises on the relevant actions

Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Maritime Standards Naval Architecture Navigation Offshore Oil Pipelines Salvage Ship Electronics
rss | archive | history | articles | privacy | 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: 0.0976 sec (10 req/sec)