Marine Link
Wednesday, October 26, 2016

Tankship Overcapacity Blights the Market

June 6, 2013

With seasonally weak demand in the second quarter, the short-term view for freight rates does not look positive finds Drewry.

Global oil demand declined by 1.0% in the first quarter of the year to 89.9 million bpd, although some recovery in demand is likely in the second half of the year based on seasonal demand, which will push overall tonnage demand higher by 2% in 2013.

This will be countered by a continuing supply of fresh tonnage through the year. With 46 million dwt already added since 2010 and a further 17.1 million dwt (4%) due this year, utilisation will be poor and freight rates will not show any noticeable signs of recovery.
There is a glimmer of hope for the longer term from the slowdown in ordering and the gradual global economic recovery. Utilisation will improve from 2014 onwards and shift in trade patterns will also lend some support to rates as voyage lengths increase.

Crude oil shipping from production growth centres such as Latin America, Africa and the Middle East to the emerging refinery capacity in Asia is likely to increase gradually, whereas shipments to the US and Europe will tail off. This will be further driven by the shrinking margins in European refineries, and increased domestic production and stagnant refinery capacity in the USA.

Drewry expects tanker demand to increase at a compounded annual growth rate of about 5% through to 2018, reaching 420 million dwt. Tanker owners are likely to see improved conditions from 2014 onwards once the existing phase of overcapacity eases, with improved demand and some slowdown in supply growth. However, if current attractive newbuild prices prompt excessive ordering, the market might not break the cycle of overcapacity for a long time, delaying any hopes of recovery.

“Tanker Forecaster” is a quarterly report published by Drewry Maritime Research.

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