The forecast period up to 2027 suggests a mixed outlook across different vessel types. We anticipate that orders for Bulkers and Tankers will gain momentum, while demand for Containers and LNG/LPG vessels will decline. Despite the expected rise in Bulker and Tanker orders, the overall order book will likely shrink due to a surge in deliveries for Container and Gas vessels.
Geopolitical Tensions
Geopolitical tensions, such as the Houthi attacks in the Bab Al Mandeb Strait, are creating both risks and opportunities for shipping. The rerouting of vessels has supported various shipping segments, bu the volatile nature of the conflict introduces significant uncertainty. A sudden halt in attacks could negatively impact shipping, while prolonged disruptions could offer upside potential.
Additionally, the global economic landscape remains uncertain due to geopolitical conflicts, sanctions, and trade wars, which could affect demand. The recovery of China’s economy—crucial for global trade—is also unstable, and high interest rates in Western economies increase the risk of a potential recession, which could delay future growth.
Here’s a summary of how this uncertainty could play out across tankers, bulkers, containers, and gas industries based on our forecast data.
Tankers
Volatility in rates and expectations will continue with movements in the oil price, Russian volume developments, preemptive measures in the Red Sea, OPEC+ decisions and members’ compliance as well as China’s ability to maintain economic growth, high crude imports and refinery runs.
We expect Russia’s oil exports to continue to decline, with Europe sourcing from suppliers further afield such as MEG, US, and Latin America and this will continue to support ton mile demand and therefore rates going forward.
Tanker ordering activity has continued at a relatively strong pace in 2024, already equaling order activity seen in 2023 at 36 mil DWT, levels not rivaled since 2017. The delivery schedule for 2024 is low, however, will gain pace in 2025 and onwards. The total Tanker order book to fleet ratio, currently at 12%, has been increasing through 2023 and 2024.
Ton-mile demand expectations in 2024 and beyond remain strong in our current Base Case for both crude and product carriers, following negative developments in both 2020 and 2021. A key factor for stronger growth will be the recovery of oil demand in China, without being hindered by rising global oil prices.
With no remedy in sight for the Houthi aggression in the Red Sea we expect that the positive impact of sailing longer distances to avoid risk areas in the Red Sea will continue. However, should the risk abate and be deemed acceptable to the industry with ships again returning to the Suez Canal, the market will likely face a downward correction.
Bulkers
A low order book and limited supply growth continue to support a fundamentally strong Bulker market going forward. Moderate demand growth is expected as interest rates ease in developing economies, investment in green energy accelerates and changing trade flows increase ton-miles.
Bulker values have increased significantly in the last year due to improving sentiment, and despite solid freight rate expectations, the potential upside looks limited due to already elevated levels. Secondhand values are also expected to receive downward pressure from declining newbuilding prices when the ordering activity of Container and LNG vessels subside.
Rerouting has been a strong driver of demand growth this year, as longer journeys around the Panama Canal and the Suez Canal have increased sailing distances and ton miles. The situation in Panama is improving and is expected to normalize in Q4. However, the conflict in the Red Sea remains highly uncertain with no end in sight, and so far this year, Bulker transits through Suez have declined 37%.
Additionally, the ongoing war in Ukraine has extended shipping distances, which is expected to keep ton-mile values elevated, as the Western economies’ separation from Russia appears to be a long-term shift.
Despite several stimulus measures initiated by the Chinese government, there has been no sign of improvement in the Chinese real estate sector. This will likely continue taking its toll on the Chinese steel production, as construction activity eases.
The ton-mile heavy China-Brazil iron ore trade is growing, and Vale is planning to expand capacity. In addition, the Simandou iron ore mine in Guinea is scheduled to open in the end of 2025, and it has a potential export capacity of 120 million tons of iron ore per year.
Gas
In the US, we expect LPG production to grow at a more moderate pace than in previous years and forecast a growth of 4.4% in 2024, despite a strong 1Q24. Exports out of the US have been strong so far this year, but with less production growth for the remainder of the year and an expected active hurricane season. We forecast export growth of 7% compared to 13.4% in 2023.
Market players are still ordering VLAC and the order book has reached 51 vessels with several vessels expected to be delivered in 2026 and 2027.
Did you Subscribe to our daily newsletter?
It’s Free Click here to Subscribe!
Source: Veson
