Over the last decade governments, the shipping industry, the ship recycling industry and NGOs, have been involved in long drawn discussions and negotiations over the need to regulate internationally the recycling of ships so that it takes place in a safer and less polluting ways.
Drewry’s latest Tanker Forecaster shows a market still blighted by surplus capacity. With seasonally weak demand in the second quarter, the short-term view for freight rates does not look positive. Global oil demand declined by 1.0% in the first quarter of the year to 89.9 million bpd, although some recovery in demand is likely in the second half of the year based on seasonal demand, which will push overall tonnage demand higher by 2% in 2013.
Bulk investors are on the war path and there’s some serious business being done. Last year orders for tankers and bulkers slumped to 36m dwt, even lower than in the late 1990s when bulk orders averaged 44m dwt a year. With only 13m dwt of tankers and 23m dwt of bulkers ordered, analysts could relax. But this year orders have doubled again, with 24m dwt contracted in the first four months.
Ocean carriers cannot afford to operate services from Asia to Europe at rates which are between 25% and 30% lower than in January. Although the recent collapse of rates was excessive, it will not be reversed until carriers withdraw at least two more loops to North Europe – preferably before the peak season.
Tanker orders can be used to reflect oil shipping company managers’ expectations of future supply and demand. Managers often place new orders when future demand is expected to increase more than supply, on the condition that they expect to generate profit with the investment. Since tankers generally take more than two years to construct (and sometimes up to five years), the metric is often more relevant to long-term investment horizons.
Over the past week, here at DNV, we have done another market analysis to assess how fast LNG will win into the marine fuel market. I am not at liberty to share the results, but it got me thinking about a broader theme.
Focus on the US and structural changes likely to impact tankers. Demand: The tanker market is doing full steam ahead – not in relation to demand, earnings or actual operating speed, but in relation to structural demand changes in the West. At the epicentre of this is the world’s most thirsty oil consumer – the US. Not to be missed by anyone, the US oil demand recorded a 16 years low in 2012.
Limited inflow of new tonnage and very high volumes being transported establish light at the end of the tunnel. Demand: The first couple of months have been challenging for all vessel sizes, but what was expected to become an extraordinary difficult year for Panamax owners has so far proven to be a somewhat positive surprise.
Demand for very large crude oil tankers has virtually “ground to a halt” as the oversupply situation worsens and imports from the US drop, even as the Asian region continues to support a considerable portion of consumption, according to Andreas Sohmen-Pao, ceo of BW Group.
Drewry’s research shows that the average size of vessel deployed between Asia and North Europe now exceeds 10,000 teu for the first time. Orders for Ultra Large Container Vessels (ULCVs) have been quiet recently, but the pace of growth in vessel sizes will continue to outstrip cargo growth for the foreseeable future.