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Tanker market predictions border on the verge of impossible

Friday, 26 April 2013 | 00:00
The constantly shifting patterns of tanker trade makes it nearly impossible for anyone to safely make any kind of prediction about the future course of the tanker market claimed the latest weekly analysis from shipbroker Intermodal. Still, according to the report, during the past year, there have been a few developments that help draw a more clear picture of what lies ahead for certain parts
of the world like in the “Land Down Under” for example. According to Intermodal's analyst, Eva Tzima, "the refining business in the Australia has become an ever growing challenge for companies operating in the country, most of which haven’t been profitable for some time now. As most of the sites were built around the late 1950s, with specifications to process sweet crude, companies have had to digest powerful capital injections in order to upgrade the infrastructure of their facilities and adapt. At the same time, competition from Asian countries has grown significantly. Existing refineries in India, China and Singapore manage to offer more competitive prices due to the fact that compared to their Australian competitors all these sites operate on newer more competitive technology" she said.
Tzima added that "as a result, any of these big sites alone produces multiples of the total Australian capacity, achieving those much needed economies of scale that the former are missing. On top of that, Australian companies have had to struggle with high operating costs due to appreciation of their local currency. The AUD has strengthened significantly against the USD, leaving refiners in a position of having to cover their AUD expenses with USD margins" she noted.
Intermodal's analyst added that "very recently, Royal Dutch Shell has announced its decision to sell its second refinery in Australia, located in Geelong,Victoria. This comes after the company closed down its other local refinery back in September last year and together with Caltex’s decision to shut down their Sydney operation. Both sites are now in the process of being converted into import terminals, a fate that will be shared by the Geelong refinery if a buyer isn’t found by next year. The former is the scenario the majority of market sources view as the most dominant, as it would be highly unlikely that that any of the major players will decide to invest in a loss generating refinery that can’t compete in today’s challenging environment, let along in a country the political objective of which hasn’t showed any signs of intention to subsidize the industry and follow the example of Asian governments".
As a result, "such a development would leave Australia with only four refineries in total, down from eight just nine years ago. Given that this is a country that imports more than 80% of its crude requirement and that this year alone, and despite overall being a net exporter of energy, is expected to rely on imported fuel for more than 50% of its consumption, everything points towards one direction; a long lasting trend of strongly increased imports for refined petroleum products set to begin in the not so distant future. It’s not by chance that Shell itself has shifted its focus in its Pulau Bukom refinery in Singapore, the country from which Australia gets almost 60% of its imported refined products.
With the country’s refining capacity set to be reduced substantially and the fact that its geographical position doesn’t allow for import of oil via pipelines, Australia is bound to become a very big importer of oil products and subsequently boost the product tanker market, which has already grown significantly in the area. There will always be some refining capacity in the country for the sake of avoidance of supply cuts but I believe this will end up being a very small portion of what it was a few years ago. This is neither a short term nor a long term forecast, but rather a Medium-Range one…and it looks very positive" Tzima concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
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