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Thursday, September 20, 2018


Five leading tanker analysts: Colin Cridland Simpson Spence and Young, Jarle Hammer, Fearnleys AS, Martin Stopford, H. Clarkson & Co, Finn Engelsen Jr, Lorentzes & Stemoco AS, and Odd Hassel, Cambridge energy Research Associates (CERA), presented their views at the INTERTANKO Athens seminar on 24 October.

The challenges currently facing the tanker industry are global and will affect all markets and tanker segments. The consensus was that the new economic climate will strongly affect oil demand and thus also the demand for tankers. Jet fuel is experiencing the strongest correction with declines in current and future demand. The changes in petroleum products demand, the surplus refining capacity and the continuing growth in the supply of LPG and naphtha will create imbalances that will be difficult to correct without serious price implications. These imbalances may cause increased product trades.

In addition to facing relatively flat oil demand, more short haul oil is coming on the market, in particular from Russia and the Caspian region. This will mean that there will be a reduced demand for long-haul Middle East oil, which will be a serious challenge to OPEC.

Oil is also facing competition from LNG, as a more environmental friendly energy source, as well as coal in, for example, China because coal mines are close to some major energy consuming areas.

The supply side may become an even bigger challenge than the demand for oil because of the 66 mil dwt orderbook, which to a great extent will be delivered before the phase-out of single-hull tonnage required by MARPOL 13G.

The situation in the world economy today is described as a synchronised downturn. In shipping we are experiencing the same situation: cruise markets, dry bulk markets as well as the container markets are all in trouble mainly due to overbuilding, but also because of the reduced demand caused by the economic downturn. Until now the shipyards have had full orderbooks, but they will soon have to be filled up for 2004 and beyond. The demand for newbuildings in most shipping sectors today is strongly reduced. Newbuilding prices, which are already weakening, may be further reduced. Compared to the prices before the Asian crisis in 1998, current newbuilding prices in US dollars are lower, but converted into South Korean Won, current prices are considerably higher. This indicates that at least South Korea may have the ability to further reduce newbuilding prices, perhaps as much as 15%.

More products will come from refiners in the Middle East, where refining capacity has been increasing over the last 10 years. Over the next 3 years there will be more production of low sulphur gasoline and these refiners will probably undercut other producers, for example, in Singapore and Taiwan, China.

The handy product tanker market recovered considerably in 2000 due to low product stocks and huge US gas substitution demand, which continued into 2001. The strong rates resulted in massive ordering, and weaker rates. In 2002 the handy market is expected to be weak. Scrapping is expected to accelerate but the fleet will probably grow. In 2003 Finn Engelsen Jr. expects a US/Asian recovery and an upswing in demand and freight rates.

Further consolidation and restructuring were expected in the tanker market. There are many challenges in the current market, however Odd Hassel from Cambridge Energy Research Associates concluded by saying that the winners will be those who are not blinded by the short-term depressed outlook and who take the lead in restructuring, which is long overdue.