Tanker freight rates to remain level at best during 2012, compared to past year says analyst
Saturday, 28 January 2012 | 00:00
In a recent analysis on the course of the tanker market during 2011 and its prospects for 2012, US-based Mcquilling Services said that in 2012, it expect spot freight rates to hover at or near 2011 levels (adjusted to 2012 WS flat rates). In a separate note, Stolt-Nielsen said during the week that "in 2011 we believed that the turnaround in the tanker market would come in 2012, which now looks a little optimistic. The outlook for 2012 remains challenging. The question is, will the western economies be able to gain control over their budgets while at the same time stimulating growth. We anticipate continued weak demand" said Stolt-Nielsen.
Looking back at 2011, total tanker demand contracted by 0.5% from 2010 levels said Mcquilling in its analysis. “This decline was influenced by several unexpected events such as the Libyan civil war, which slashed North African export volumes for the majority of the year. As a result IEA members released supplies from Strategic Petroleum Reserves, which further eroded ton-mile demand. Weak economic activity, reduced refinery utilization in Europe and lower purchases of West African crude from Asian customers also had an effect” said the company’s research.
The marine transport advisers continued by saying that “the VLCC sector continues to be the most consolidated class for the transportation of crude and residual products. A total of eight trades comprise almost 80% of VLCC demand. In clean petroleum products, evolving trade routes increased LR1 ton-mile demand by over 10% but the MR2 class remains the workhorse of the sector. We anticipate excess tonnage supply will remain the primary theme during the forecast period. The downside risk to the global economy will add an additional element of uncertainty to tanker demand. As a result, we forecast that demand should rise by an average of 1.5% per year for crude and residual products and by almost 2% per year for clean petroleum products” said Mcquilling Services, also adding that “in an effort to improve our forecasting, in this year’s cycle we attempted to capture trade between non-OECD countries. This decision was made due to the rising energy demand in developing countries, new refining infrastructure and changes in oil production trends. As a result we have been better able to analyze recent changes in the tanker market” it saidd.
In terms of supply during 2011, the company’s research expected a total of 276 vessels to be delivered into the tanker fleet, but in the end only 228 actually did so. “Although this helped limit tonnage capacity growth in 2011, it will likely pressure fleet expansion, particularly in 2012 and 2013 as delayed delivers enter the trading fleet. Our exit profile was estimated at 75 vessels but 69 actually exited the trading fleet. The most noteworthy difference occurred in the VLCC fleet, which fell by 18 vessels. This was partially influenced by demand for FPSO/FSO conversion. The continued expansion of offshore reserves will keep demand of older tankers for conversion to FPSO/FSO units elevated. As a result, we forecast at least 15 VLCCs will be removed from the fleet each year in our forecast period” said Mcquilling.
Moving on to costs, the company’s analysis mentioned that “in order to reflect current industry practices in response to rising bunker prices, we lowered our net-fleet sailing speed by one knot to 13.5 knots at the start of 2012. Our assessment of historical bunker prices compared to Brent crude oil showed that the traditional correlations no longer yielded an accurate basis for forecast. This resulted in placing an additional supply-premium on bunker prices to US $650 per metric ton” it said.
Finally, asset prices declined throughout 2011. “Overall prices contracted by almost 9% across all class sizes and ages. The only sector to post a rise in secondhand asset prices was MR vessels. The comparatively higher freight rates recorded by the MR class during 2011 supported this
development. Syndicated loans to the shipping industry will remain limited in the current economic environment. Ironically, this factor should help the market gradually return to balance as it should limit orders for new tankers. As the lending capacity is constrained, some companies may not be able to meet loan-to-value covenants, which should encourage industry consolidation. This could open the door for companies from outside the shipping industry to acquire assets” concluded Mcquilling Services.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
There are no comments available.