Tankship Owner Warns of 'Russian Roulette' Market
Euronav reports its net loss slipped to US$ 10.7 million in the first three months of 2013, compared with US$ 9.0 million a year earlier.
In its Q1 2013 financial report Euronav makes broad observations on the global tanker market as follows:
The first quarter has seen moderate growth in cargoes comparing 2013 over 2012 and, due to changes in trading pattern, a greater increase in ton-miles. Nevertheless the overall returns for tanker shipping measured in TCE were lower. The supply side of the market remains the fundamental problem. The world fleet continues to increase as the newbuildings contracted up until 2010 are being delivered albeit on a delayed schedule compared to the original contractual delivery dates. More importantly owners of older vessels do not yet scrap them, whereas higher scrapping activity is fundamental to any potential rebound in the market.
This oversupply is exacerbated by the market structure. Charterers and their brokers continually pressure owners to accept lower rates to reduce the cost to charterers without a second thought to the return to the owner. The levels reached today are no longer sustainable even for an owner with fully written down assets as net freights often are not enough to pay for basic ship operations let alone longer term maintenance or dry docking. Owners have taken all the measures available to them such as slow steaming and engine retrofitting but the market structure simply absorbs these savings and passes them on to the charterers.
Paddy Rodgers, CEO of Euronav commented: "The risks associated with shipping crude oil have not reduced or gone away but the companies responsible for managing those risks are not being paid sufficiently to take the steps necessary to do so. In any market this will result in the risks going unmanaged. The market is playing Russian roulette and on one voyage one day one charterer will find out there was a bullet in the gun after all. When that happens, do not call the broker! commented."