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Saturday, October 20, 2018

Strong product tanker market – new highs forecast in China’s imports


The product market continues to be relatively strong despite high deliveries of new ships.  BP has just presented its Review of World Oil, and the latest figures show A very strong increase in the products trades both last year (+14%) and this year (+9%). This year may be supported by both increased gasoline and diesel imports to China.


Shanghai Daily/SSY reports that China became a net importer of gasoline for the first time in May as monthly gasoline imports reached 339,000 tons (about 87,000 b/d) - the highest in at least 29 months and up from zero imports last year. Monthly gasoline exports were 160,000 tons, down about two-thirds year-on-year. Sinopec and China National Petroleum Corp’s  diesel imports also hit a record high of 700,000 tons in May, 35% higher on the month, as exports fell by a third to 40,000 tons. The rise in imports comes as the country diverts fuel to Sichuan following the earthquake, reducing supplies in other regions. In June, Sinopec and CNPC are forecast to import 600,000 tons of gasoline and 1m tons of diesel, pushing China's importing volume to a new high.


When looking at the product imports in other major import areas (see above graph), we see a decline rather than an increase in product imports, both in Europe, the U.S. and Japan. 


The BP review gives the increase in tonnes, but assuming 9% annual increase in tonne miles, the above graph shows that market will be able to virtually take all ships delivered over the next few years. However, reducing the growth to 6%, we see an increasing surplus peaking in 2010.  If the growth is only 3% the situation looks serious and zero growth in trade will be a catastrophe for the market for several years even if there were no further ordering.

The above graph also includes chemical tankers which to some extent will be competing with product tankers.  The fleet projection is based on the current Clarksons orderbook, phase-out of all single hull tankers when they fall due, and total deliveries 2008-2011 of some 1,200 tankers of 42m dwt.  The non-double hull product tanker fleet to be phased out is some 477 tankers of 14m dwt, of which some 47 that have double bottom or double sides and are built after 1985 can trade beyond 2010 until the age of 25 years.


INTERTANK0 has recorded 23 tankers of 0.62m dwt in the group 10-60,000 dwt scrapped so far in 2008, but we still have some 29 to be phased out this year.


In 2007 we recorded 86 period charters of contracts above 6 months of tankers below 60,000 dwt.  The average size was 43,569 dwt, average period was 2.3 years and the average rate $23,322.


So far in 2008 we have recorded 40 period charters of tankers below 60,000 dwt.  The average size was 44, 659 dwt, average period was 2.2 years and the average rate $22,673.


The information we have for the product tanker market is fragmented and we find it hard to put all the various details together to obtain a complete picture. On the one had we have the trade data from BP’s Review showing a strong increase in product exports and imports and with freight rates relatively high. On the other hand we see that the product imports to the major import areas such as Europe do not seem to increase.


Contact: Erik Ranheim