The Baltic Dry Index for dry bulk shipping has witnessed a record low reaching 298 points today. D rewry’s forecast on dry bulk shipping can be read from MFAME’s exclusive coverage.
Here is an analysis on the tanker market based on the reports published by BIMCO. BIMCO analysis at tanker shipping reveals that the market remains strong as demand stays high.
Demand
One of the most characteristic developments in 2015 was the declining price of crude oil during the second half of the year. Brent crude oil dropped from USD 57 a barrel (bbl.) on 1 July to hit USD 37 a bbl. on the last trading day in 2015. Going into 2016, the trend has continued with further decline in prices.
More than anything else, the healthy refinery margins that have followed in the wake of the lower input price has stimulated oil products trading and refinery throughput. This has been a strong boost to overall oil tanker demand. The oil industry had varied perspectives in justifying the reason for falling crude prices. Here is where you can find all about falling oil prices which we have covered exhaustively under MFAME’s editorial.
Supply
Fewer new ships have been ordered over the last few years and this has played an important role in creating the current ‘positive’ market. During the final four months of 2015, this trend ended and new orders were placed twice as fast, and the total for the year ended at 11.4 million DWT. All sizes got a fair share.
For the crude oil tanker segment, the newbuilding market was busy throughout the year. 35 million DWT was ordered, out of which 66 were VLCCs. But most significant was the sudden return of interest in aframax crude carriers. Following a decline in the aframax crude oil tanker fleet from 2013, no less than 57 new orders were placed in 2015. This was the highest number of aframax crude oil tanker orders since 2006- when 101 were ordered. 2016 marks the end of a multi-year slowdown in fleet growth for crude oil tankers. BIMCO expects the crude oil tanker fleet to grow strongly in 2016. Most of the new tankers will be delivered in the second half of 2016.
Outlook
BIMCO expects to see prudent owners and operators starting to fix on long-term charters as the 3-year time charter freight rate for a modern VLCC has reached USD 44,000 per day and the 1-year time charter rate stand at USD 58,250 per day.
Considering that these are the best time charter rates since the crisis and the freight market for crude oil tankers is expected to soften sometime during 2016, the current market presents an opportunity for some, to secure solid revenue and earnings streams for a fixed amount of time.
Moreover, in terms of the asset value at stake – the return on investment is much-improved from 2006-2007 when time charter rates were at the same level. In today’s market, you can buy a brand new “resale” for USD 100 million, whereas in 2006-2007, a resale of a new 310,000 DWT VLCC would cost you USD 140 million.
Source: Read the Full report from BIMCO
