A leading shipping consultancy says "supply side" constraints, rather than an increase in demand, are behind soaring tanker rates. US consultants McQuilling Services, says tonnage availability is currently being squeezed by slower ship speeds, port delays, conversions, floating storage and a bias against single hulls, leading to higher tanker rates. McQuilling said in its weekly note that surging bunker costs have slowed average ship speeds as operators try to reduce bunker consumption.
“One knot of speed reduction in the VLCC fleet absorbs about 10 – 20 vessels of supply,” said the report.Port delays, in terms of disruptions to loading and unloading activities, have also “absorbed additional tonnage”, said McQuilling.
“One incremental day of delay across the fleet results in removal of tonnage supply equivalent to 10 VLCCs, 11 suezmaxes, 23 aframaxes and 7 panamaxes,” it said.
The report also highlighted the record numbers of conversions slated for 2008, which "impact the market dynamics by constraining supply and thereby putting an upward pressure on freight rates.”
Another “supply side” constraint identified by the McQuilling report was the spate of VLCC bookings by Iran for to use as temporary off-shore storage.
McQuilling estimated Iran booked “around 15 vessels, of one and two million barrel capacity...with as much as 25 million barrels on board.”
A Singapore-based chartering manager told Tankerworld, however, it was wrong to see Iranian storage as a supply side issue. "I would consider those bookings to be a spike in demand,” he said.
Source: Port World