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.
LR Fobas forecasts 4.2% of newbuildings delivered between now and 2025 as being fuelled by LNG. With the level of sulphur content in marine fuels is an increasing concern, and the IMO is calling for a reduction of the limit to 0.5% by 2020. As a result shipping lines are increasingly studying alternatives to heavy fuel oils (HFOs), and LNG-fuelled engines appear to be a viable option for deep sea trades in the long-term, particularly on liner trades, says Douglas Raitt, Global Fuel Oil Bunkering Analysis and Advisory Service (Fobas) manager at Lloyd's Register Asia.
A decline in demand for Capesize vessels has been countered by an improvement in demand for Panamax vessels, according to the latest Dry Bulk Insight, published by Drewry Maritime Research. This left the Drewry Hire Index unchanged from January’s level. Panamax was the sole segment to record an improvement in earnings in February. Rates for vessels doing round voyages from Far East to East Australia more than doubled, rising from $3,954pd to $6,818.
Drewry's latest LNG Insight saw heating demand subside in major importing regions in February. Cargo availability also tightened because of a few unplanned shutdowns, leading to a 4% decline in the LNG Freight Index. LNG shipping enjoyed a dream run during 2011 and 2012, owing largely to increasing tonne-mile demand and an almost stagnant fleet.