Mid-Year Maritime Market Review 2024: A Turbulent Start And Volatile Prospects

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The year began with expectations focused on the EU’s Emission Trading System and new OPEC+ supply cuts. However, the narrative shifted as Houthi attacks on commercial shipping in the Red Sea escalated, causing significant rerouting of vessels and impacting the tanker market, reports Gibson.

Houthi Attacks and Market Impact

The Iran-backed Houthi rebels intensified their attacks on commercial shipping in January and February, and after a brief lull, resumed with greater sophistication in May and June. These attacks, initially targeting Israeli-linked vessels, have become indiscriminate, leading to the seizure of one ship, the sinking of two others, and the tragic loss of four sailors’ lives. This has forced many ships to reroute from the Suez Canal to the Cape of Good Hope, disrupting shipping schedules and increasing operational costs.

The impact on tanker rates was minimal in late 2023, but the first quarter of 2024 saw significant tightening in the clean markets. Long Range 2 (LR2) rates soared in January and remained volatile throughout the first half of the year. Very Large Crude Carrier (VLCC) utilization also increased due to the rerouting of cargoes around the Red Sea, though average rates remained middling despite a spike in May.

Iran and Iraq increased their crude exports by 270,000 barrels per day (b/d) and 160,000 b/d, respectively, in the first half of 2024. Non-OPEC+ oil supply continued to grow, with the US adding 170,000 b/d, and both Guyana and Brazil contributing over 200,000 b/d each. Despite these increases, OPEC+ extended its production cuts into 2025, with a gradual tapering starting in October 2024.

The EU extended its Emissions Trading System in January 2024 to include all large ships entering EU ports. The system now covers 20% of emissions from voyages starting or ending outside the EU and 40% of emissions between two EU ports. While the immediate effect on tanker markets has been minimal, compliance costs are expected to rise over time.

Water levels in the Panama Canal increased, leading to the gradual lifting of transit restrictions and normalizing auction prices for routes from the US Gulf to the West Coast of Latin America. The Dangote refinery in Nigeria began initial production in January, exporting fuel oil, naphtha, jet fuel, and diesel internationally, with full-scale operations approaching.

The Trans Mountain Expansion (TMX) pipeline started commercial operations in May, exporting around 350,000 b/d to the US West Coast and Asia. Despite OPEC+ production cuts, oil prices averaged $83.44 per barrel in the first half of 2024, slightly up from $79.91 per barrel in the same period in 2023. However, the second half of the year may see more volatility due to potential supply deficits.

The tanker fleet saw 33 additions in the first half of 2024, compared to 69 in H1 2023. Scrapping was limited, with only five tankers scrapped. Newbuild orders surged, with 229 tankers ordered year-to-date, slated for delivery between 2026 and 2029. Second-hand asset prices increased, especially for Suezmaxes, while older VLCCs saw a slight price decrease. Newbuild prices rose by 5-9% for crude tankers and 3-10% for clean tankers.

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Source: Gibsons