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Tanker Market in the Doldrums As Owners Lose Liquidity By the Day

In stark contrast to the dry bulk and container segments which have been rallying for much of 2021, the tanker market is more than lackluster. In a recent note, shipbroker Allied Shipbroking said that “the tanker market has been off balance for quite some time now, while expectations W-O-W change for an imminent improvement have failed to come to fruition one after another so far. Owners have seen their liquidity drained, as earnings have remained below OPEX levels for several quarters now. As a result, newbuilding projects have been anemic, while SnP business has been mainly driven by speculation”.

Source: Allied Shipbroking

According to Allied’s Research Analyst, Mr. Yiannis Vamvakas, “the key concern for market participants is undoubtedly demand, as figures are showing a persisting reduced consumption globally, pressured by COVID-19 disruptions in mobility and production. In NW Europe, oil imports have been held back during the summer period, with volumes in June and July remaining below the average import quantity witnessed in the year so far. Additionally, exports of gasoline and other oil products from Europe have also deteriorated as of late. Confidence has yet to rebound back to pre-pandemic levels, with fresh worries over the Delta variant of COVID-19 increasing the risk for new restrictive measures being put in place”.

Vamvakas added that “a similarly troubling situation is being noted in the US as well as of late, with oil export data illustrating a declining momentum in July. Meanwhile, oil production in the country also posted a drop last week, falling to 11.2 million bpd. Elsewhere, demand may have showed some signs of recovery, albeit any shift remains fragile, as lack of stability affects all parts of the industry. On the supply front, the total fleet growth this year so far has been limited compared to other years, with the YTD rise being estimated at just 1.1%. The respective number for 2020 was 1.9%, while in 2019 it was more than double at 3.1%. Given that the fleet has not increased significantly, the slump in demand has been the key driver in the “crisis” faced right now”.

Source: Allied Shipbroking

“The imbalance described above has as a result the limited investments being made in the sector and expectations still remaining subdued at least until the end of 3Q21. Examining the numbers, we can see that the current orderbook stands at 177 units, just 2 more units than the starting orderbook for 2021. The magnitude of this figure is further highlighted when compared to the 192 units of August 2020 and the 237 units of August 2019. Hurt sentiment and lack of confidence have also curbed appetite for new orders. Shipyards are witnessing their slots being filled by other vessel types, a trend that is likely to continue, while we have seen approximately 20 cancellations in the year so far”, Allied said.

Source: Allied Shipbroking

“In contrast to this, SnP activity has flourished in 2021, as buyers are trying to exploit the situation and acquire vessels from distressed owners while betting on a fast-approaching market recovery. It is estimated that 1,216 units have changed hands in the year so far, an impressive figure considering that the total number of sold tankers in the whole of 2020 was 1,183. Interestingly enough, oil products (MRs and LRs) and Aframaxes have been the main focus. The former have proven to be more resilient to the problems faced by the tanker market, while the latter are considered more versatile within the crude oil sector. The worrying conditions in this segment still hold. However, this does not mean that a freight market recovery will not come. Therefore, the current “bet” is between owners that have the required patience and liquidity to wait out this storm and those that will decide to remain in the sidelines and follow the flow once the well-anticipated recovery in earnings starts finally to take shape”, Vamvakas concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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