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Condition and tendencies of the tanker market

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Condition and tendencies of the tanker market

TANKER MARKET AT A GLANCE

  • The crude tanker market is in better shape than a year ago.
  • Market is still suffering from massive oversupply.
  • Tanker industry (as well as the whole shipping industry) is undergoing a process of transition driven by a combination of technological advances related to fuel efficiency and environmental requirements.

TIMECHARTER RATES ARE UP, BUT REMAIN LOW IN A HISTORICAL PERSPECTIVE

Aframax Earnings
2014 vs 2013

Suezmax Earnings
2014 vs 2013

VLCC Earnings
2014 vs 2013

World seaborne oil trade

World oil chokepoints and trade flow

 

DEMAND

  • SEABORNE CRUDE OIL TRADE IS DECLINING.
  • The main reason for this decrease was that both North America and Europe reduced imports of crude oil, albeit for very different reasons.
  • The decrease in US and European crude oil imports from West Africa has made the crude oil available to the Asian market instead.

 

SUPPLY

Tanker fleet development in a million tons DWT

SUPPLY

Order book in percent of existing fleet ‐ Tankers in excess of 10.000tons DWT

SUPPLY

Newbuilding contracting activity is being warmed up by

  • Vast shipyard capacity
  • Low newbuilding prices
  • Support from local export credit agencies

 

SUPPLY

Investments in Shipping

Average newbuilding price 12% above the low of 2013

 

Average scrapping age continues to decline

Pressure from environmental requirements

  • SOx (MARPOL Annex VI)
  • NOx (MARPOL Annex VI)
  • Ballast Water (BWM Convention)
  • Recycling (Ship Recycling Convention)
  • CO2 (MARPOL Annex VI)

  

From 01.01.2015 the sulphur content allowed in the Emission Control Areas (ECA) will decrease from the currently allowable 1% to 0.1%

 

ECAs: Cost of Compliance

In practice (obviously dependent on bunker prices at the time) there are estimates that an Aframax doing a cross North Sea voyage will incur an additional cost in excess of $100,000 basis a round voyage of 9 days.

Economic Pressure

Based on Aframax tanker, 1 year TC rate and Rotterdam bunker price

Increasing the performance of existing vessels

OUTLOOK

  • Fleet growth is unlikely to exceed 2% p.a. on average through 2016 (1/3 of the average growth rate seen between 2009 and 2013).
  • Changing trade dynamics and longer travel distances could potentially absorb the increasing inflow of vessels.
  • The crude tanker fleet is young and premature scrapping seems inevitable if future supply outperforms demand by a large margin.

Evgeniy Dolgikh, 10.11.2014

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