2024 began with significant events impacting the shipping industry. OPEC+ supply cuts and implementation of the EU Emissions Trading Scheme initially dominated the market. However, these factors were quickly overshadowed by a series of Houthi attacks on commercial shipping in the Red Sea, according to Gibsons.
Clean Freight Rate
Clean freight rates declined sharply in the second half of the year as a surge of Suezmax and VLCC vessels switched to clean trades to capitalize on higher clean product rates. This trend, combined with weak Chinese demand and shifting import patterns, negatively impacted freight rates across all vessel sizes.
The commencement of operations for the Trans Mountain Expansion (TMX) project in May boosted Aframax tanker demand by increasing crude oil exports from Canada to the US West Coast and Asia. Meanwhile, the easing of Panama Canal restrictions, which had previously supported higher freight rates, reduced its impact on the market.
Despite initial challenges, the Dangote refinery startup in Nigeria began impacting Atlantic refining markets and clean tonne-miles. The commissioning of the Olmeca refinery in Mexico had a limited impact in 2024 but is expected to have a greater influence in 2025.
Increased crude oil exports from Guyana, particularly benefiting VLCCs and Suezmaxes, contributed significantly to Latin America’s overall crude export growth. In contrast, US crude oil exports remained relatively flat despite increased production due to high refinery utilization and strategic stockpiling. This trend, while bearish for crude oil, provided some support for the US Gulf clean market amidst a generally weak market in the second half of the year.
Secondhand Asset Price
On the supply side, a more than two-decade low of just 83 vessels has hit the water so far this year, with a few stragglers likely to slip into the new year. The orderbook, however, expanded rapidly throughout the year, with orders reaching a 9 year high. LNG proved to be the most popular alternative fuel, although most orders were for conventional tonnage.
Secondhand asset prices for the most part continued rising in the first half of the year, though with sentiment and rates shifting in the H2, secondhand transactions and prices eased. Nevertheless, prices are up across the board compared with 2023, except for 15-year-old VLCCs, which decreased by 3%. Suezmaxes staged the biggest increase in secondhand prices, increasing by between 10-20% depending on the age. Newbuild prices similarly saw only one exception to increases across the board, with LR1s flat compared with 2023. Prices for all other vessel classes rose in the first half of the year and softened in the second, though still comparing favorably to last year.
The year ends with freight rates in most markets lower than in 2023. Looking into 2025, many are wondering whether we have seen the peak of the current market cycle, with OPEC+ extending its supply cuts into next year and vessel supply accelerating. However, these bearish factors must be balanced against increasing production in the Atlantic supporting long haul trade, primarily to Asia, where refining runs are expected to grow by 500kbd despite challenged Chinese demand.
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Source: Gibsons
