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Wednesday, November 14, 2018

SSY half yearly world tanker trends – the upsides and downsides by tanker sector

Simpson Spence and Young Shipbrokers (SSY) is continuing J.I. Jacobs’ half yearly reports on the tanker market.

The SSY analysis provides a good overview of up- and downsides and the risks in each market segment.


According to SSY, the upsides influencing rates over the next 12 months include more OPEC cargoes; strong demand fundamentals; further building of U.S. and Chinese strategic stocks; higher-than-expected Japanese imports due to nuclear plant problems; refinery expansion in China; moderate fleet growth in 2005 compared to 2004.

The downsides include considerable growth in the VLCC fleet for the rest of 2004,; more competition from suezmaxes; greater American sourcing of medium-haul cargoes, particularly from the Former Soviet Union (FSU) and West Africa; limited U.S. growth potential for crude oil imports due to lack of spare refining capacity.

The risks include very strong oil prices that could cause a slowdown in 2005 GDP growth; disruption to crude supply particularly from the Middle East and/or Nigeria; any sharp slowdown in Chinese economic growth.


According to SSY, specific upsides influencing suezmax rates over the next 12 months include growth in cargo volumes from West Africa and the FSU; further U.S. diversification of crude sources away from the Middle East to West Africa and the FSU, to the benefit of suezmax tonnage; greater use of suezmax tonnage for fuel oil cargoes on the UKCont-Asia Pacific route as this trade expands; OBO tonnage above 100K dwt being unlikely to switch back into oil trading due to expectations of a firm capesize market. Overall the outlook into 2005 is buoyant with firm rates expected for the fourth quarter in particular.

The downsides include greater fleet growth for this sector than initially expected and more competition from VLCC and aframax tonnage .

Risks include: disruption to Venezuelan supplies that would lead to longer-haul supplies being shipped to the U.S.; disruption to Nigerian oil supplies and/or cargoes from Russia; the return of OBO tonnage above 100K dwt to tanker-trading; a slow down in U.S. oil demand.


Greater loading opportunities are likely for aframaxes and firm demand-side factors are expected to keep rates buoyant for this size sector.

According to SSY, specific upsides influencing aframax rates over the next 12 months include impetus for Caribbean trades and U.S. Gulf lighterage operations from buoyant U.S. crude demand for refining and stockbuilding; more cargoes ex-FSU; firm European demand for North African and Black Sea cargoes; a short-term rise in Indo-Japan cargoes as a result of Kansai nuclear power plant outages; substantial fleet removals in 2005; more long-haul LR2 clean trading, particularly to Asia-Pacific and U.S. markets.

The downsides include absence of sustained Iraqi exports from Ceyhan; start of business for China’s new ‘Da Ren’ tanker terminal likely to increase market share of VLCC and suezmax tonnage; little growth in Indonesian production expected; continued net fleet expansion with 22 newbuildings (of 2.3mdwt) scheduled for delivery in the 2H04 (barring possible slippage) and 62 vessels of 6.7mdwt in 2005; the potential for greater competition on long-haul product trades from rising numbers of coated modern panamaxes.

Risks include: threats of disruption to Russian output and exports, particularly for ex-Baltic trades as a result of the Yukos oil court case; any political unrest in Venezuela that could disrupt oil supplies; any further growth in the fixing of suezmaxes from traditional aframax loading areas - especially the Baltic.


SSY sees greater trading of fuel oil cargoes on coated tankers (most deliveries in this sector are of coated tonnage), should demand warrant such a shift.

According to SSY, specific upsides influencing panamax rates over the next 12 months include relative stability in Venezuela following the August presidential referendum smoothing export flow to US markets; likely short-term rise in Japanese fuel oil demand as more nuclear power stations are temporarily taken out of service for safety checks; significant volume of tanker phase-outs for this sector in 2005; more exports from Ecuador, with a 15% rise in the country’s crude production expected by end-2005

The downsides include: buoyant U.S. fuel oil inventories which could limit import volumes in the 2H04; newbuilding deliveries estimated to slightly outweigh IMO/EU phase-outs - a total of 70 vessels are scheduled to be delivered over 2004 and 2005, totalling 4.8mdwt, and phase-outs are expected to amount to 58 vessels of 3.5mdwt over the same period.

Risks include: Russian political influence may disrupt FSU fuel oil exports; competition from plentiful tonnage supply in the adjacent MR and aframax size sectors.

Sub-panamax product tankers (27-49,999)

According to SSY, specific upsides for the “sub-panamax product tankers (27-49,999)” include buoyant demand for the import of refined products into China and U.S.; additional imports of long-haul Asian product exports by markets West of Suez; recovery in the Japanese economy combined with likely additional oil demand due to more nuclear plant outages; IMO/EU phase-outs causing a reduction in the handysize fleet and helping offset some of the fleet growth in the handymax sector; increased FSU fuel oil exports from both the Black Sea and Baltic; relative political stability in Venezuela, which should raise product exports and create possible further growth in product exports from sources such as India.

The downsides include a net fleet growth in the handymax sector which is likely to bring some downward pressure on rates.

INTERTANKO’s view differs from that of SSY on the impact of phase-out in 2005.

Contact: Erik Ranheim