Tanker owners left and right have been conceding this week, that it’s not demand, but an oversupply of ships, which have been hurting their earnings. According to Frontline, “the growth in crude tanker tonne-mile demand suggests that the current tanker market is not suffering from weak demand growth, but rather from excess supply growth which has occurred over the last 18 months. Despite current market weakness which is forecast to continue in the near-term, the Company continues to believe that the market will begin to improve in 2018 as the pace of deliveries of newbuilding vessels slows and vessels are retired from the global fleet. There are nearly 110 VLCCs built in 2000 or earlier that continue to operate. This is roughly equal to the current VLCC order book. At some point in time these older vessels will permanently exit the fleet. We believe that increased scrapping is inevitable in the near term, driven by the weak spot market and the increased scrap value of tankers, which is up by approximately 50 percent year on year”, Frontline noted.
In its market outlook, Cosco Shipping said that “in terms of oil shipping demand, the overall demand for global crude oil shipping maintains a stable uptrend during the first half of 2017. Asian Pacific countries such as China and India demonstrated a stable growth in crude oil imports. Factors such as reduced production by members of the Organization of Petroleum Exporting Countries (“OPEC”) and increased crude oil exports in USA have both contributed to the increment in global crude oil shipping distance. During the same period, global shipping demand of finished oil also increased with sustained growth, mainly due to the strong import demand in Latin America and Asia, yet the increment is slightly slower than the corresponding period of last year”, Cosco Shipping said.
The Chinese conglomerate added that “in terms of the supply of shipping capacity, according to the latest information released by a research institute, shipping capacities of various types of tankers followed last year ’s trend and continued to expand during the first half of 2017, except for the Panamax, reflecting the pace of new vessels commencing operation is still ahead of vessel scrapping. In terms of shipping price, the fast growth of foreign oil trade shipping capacities in the first half of 2017 led to a general decrease in shipping prices of various types of vessels as compared to the corresponding period of last year.
According to the market benchmark, World Scale (“WS”) average index of very large crude carrier (“VLCC”) for the Middle East/ Japan shipping route is 63, representing a decrease of approximately 25% as compared to the corresponding period of last year (after including a basic fee discount, same for the statistics below). Shipping prices of other small to medium crude oil vessels also decreased (at different rates) as compared to the corresponding period of last year. The finished oil market also demonstrated weak performance, WS points of finished oil LR2 and LR1 vessels dropped approximately 20% as compared to the corresponding period of last year”, the ship owner concluded.
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Source: Frontline
