Tanked tanker sector seeks new buoyancy

Whichever way you try and skew the figures the crude oil tanker sector has had one of its worse years on record. On the positive side there are clear signs that owners and operators are actively pursuing a number of rear guard actions in a desperate effort to avert the worse.

Fortunately participants of this year’s Asian Logistics and Maritime Conference 2018 (20-21 November 2018), at the Hong Kong Convention and Exhibition Centre, will be in safe hands for an informed analysis.

In addition to the legendary president of Clarkson Research, Dr Martin Stopford, other panel speakers at Maritime Forum 1 include Giovanni Gaverone of Penfield Marine (UK) Ltd, and William Fairclough of Hong Kong’s Wah Kwong Maritime Transport. Moderating the session is one of Hong Kong’s high own profile personalities, Tim Huxley, late of Wah Kwong and now chairman of Mandarin Shipping.

In 2018, the sins of the father were visited on the son. That is to say, as recently as 2015 the tanker market was riding high with the best earnings for seven years. 2016? Not so good. Then in 2017 all the excitement of 2015, which culminated in a surge in newbuilding orders, came home to roost; and in 2018 freight rates and fleet utilisation crashed to record lows.

It takes a very long distance for a typical VLCC to come to a halt. Similarly, throughout 2018, despite a huge amount of tanker demolition (13m dwt in the first half of 2018) freight rates have barely budged. The happy outcome is that there has been no growth in the fleet this year. Unfortunately, thus far there has not been a complimentary growth in demand to edge up freight rates.

In fact, while most observers were looking at the impact of the US-China trade spat on container shipping, the tanker sector has been the more wounded.

In a recent note from Bimco, Its chief analyst, Peter Sand revealed no US seaborne exports of crude oil were recorded in August. Mr Sand commented: “The tanker shipping industry is hurt when distant US crude oil export destinations like China, are swapped for much  shorter hauls  into the Caribbean and South, North and Central America.

“The trade war is all around us now. What appeared on the horizon half a year ago is now impacting many seaborne trading lanes.

“All commodities may be impacted regardless of them being officially tariffed or not. What we see in terms of crude oil transport, is harmful to the global shipping industry as well as cumbersome to  the exporters and importers of the product,” he concluded.

Tanker owners are now busy trying to hold back a wave of newbuildings due for delivery from now until August 2021. These include 110 VLCCs, 50 Suezmax and 124 Aframax tankers. By entering into agreements with shipyards for deferred deliveries, owners will only be kicking the can down the road unless ship demolition maintains its momentum, however.

There is also a possibility that a changing oil market balance will lead to some supply side being consumed as floating storage. But ultimately this year will be a loss for crude oil tankers. Only with strict discipline and a larger increase on the demand side than the 1.5% experienced this year will bring brighter prospects in 2019.

Listen to the real experts by booking your place at ALMC 2018 now: www.almc.hk

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