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Crude Tanker Market Review

Crude Tanker Market Review

WHERE WE ARE IN THE FREIGHT RATE CYCLE

BALTIC EXCHANGE DIRTY TANKER INDEX 1998-2018



Low freight rates are weighing down the oversupplied сrude tanker market

 

DELIVERIES - DEMOLITION - CONTRACTING OF TANKERS WITHIN 2000-2018



    • After 3 years of high fleet growth the market is severely oversupplied
    • Strong increase in demolition activity has been a bright spot in 2017-18

     

    ORDERBOOK REMAINS HIGH AND FLEET GROWTH IS EXPECTED TO OUTPACE DEMAND IN 2018 AND 2019



ORDERBOOK AS % OF THE FLEET

  • 15% VLCCs
  • 8.5% Suezmaxes
  • 13.2% Aframaxes
  • 9% Panamaxes
  • 11% LR2
  • 7% LR1
  • 8% MRs/Handies


DEVELOPMENT IN ACTIVE YARD CAPACITY (NO OF YARDS - MILLION CGT)

 

FLEET HAS EXPANDED RAPIDLY AND OUTSTRIPPED OTHERWISE STRONG GROWTH IN DISTANCE-ADJUSTED DEMAND

EXISTING TANKER FLEET AGE PROFILE

Intensified demolition has drastically reduced the average age of vessels scrapped in just 3 years from 24 years in 2016 to 18 years in 2018.

If demolition remains high, the average scrapping age will continue to decrease in the coming years and could soon approach 15 years.

 

NEWBUILDING PRICES BOTTOMING OUT

Cheap newbuildings are at risk of turning into depreciating assets unlikely to yield the expected return on invested capital

 

SECONDHAND PRICES COULD CONTINUE TO DEPRECIATE EVEN FOR YOUNGER VESSELS


Two issues to consider:

  • Economic lifetime of the vessels
  • Vessels’ future earnings potential

Younger vessels could be overvalued compared with their actual future earnings potential.\

 

 CHANGES IN SEABORNE CRUDE OIL IMPORTS                      

FORCES AT WORK IMPACTING THE DEMAND OUTLOOK

The short-term demand outlook is highly susceptible to the development of some key events:

  • how much US oil exports grow,
  • when and to what degree OPEC and its peers let the oil flow,
  • to what extent Chinese demand will be affected if the deceleration in stocking activity continues. 

Evgeniy Dolgikh, 05.12.2018

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