Bullish or bearish, what does the year 2023 looks like for the tankers market? The Shipping Tribune had a chance to discuss with Mr. Saurabh Gupta, Head of Tanker Chartering at BainBridge Navigation about the tanker market expected trends in 2023. Here is what he has to share about the same -

As we bid adieu to the year 2022, we would like to look back and see what a phenomenal year it has been for the Tanker owners – be it the small chemical tankers or the Very Large Crude Carriers.

The Ukraine-Russia conflict is one of the major blows to the global economy that has affected growth and raised prices. Beyond the humanitarian crisis, the entire global economy has felt the effects of slower growth and faster inflation. During the year, Malaysia boosted its share of the edible oil market after the war disrupted sunflower oil shipments, and Indonesia banned palm oil exports to further tightened global supplies. Hence, all of these factors infused a much-needed spark into the tankers market that led to the emergence of new creative trade patterns, which were tried & executed, and that rejuvenated the tonnage demand along with exposing the supply shortage. While the spot freight rates increased at a much higher pace, TC rates were slow to join the party. Eventually, TC rates reached an all-time high with very few indications of it coming down very soon.

At this point, we need to observe the market and economic indicators which will further help us in deriving the direction to proceed in the year 2023.

First, let's take a look at the economic indicators:

The IMF chief Kristalina Georgieva has warned that for much of the world economy, 2023 is going to be a tough year as the main contributors of global growth – the US, Europe, and China – all are experiencing weakening activities. The world’s second-largest economy weakened dramatically in 2022 because of its rigid zero-Covid policy, disrupting supply chains and damaging the flow of trade and investment. And now, when the Chinese authorities decided to ease the restrictions, the country has faced an overwhelming outburst of covid cases, which will further hurt the Chinese Economy. Moreover, food inflation and energy crises resulting from prolonged Ukraine – Russia war are also not helping the cause.

From these economic indicators, we understand that demand for shipping commodities would be slow in 2023. In fact, the spot freights in the chemical and palms trade have come down by at least 10-15% from what they were till September 2022.

Now, let’s observe what is keeping the sentiments of Ship Owners and their TC Rate ideas, so bullish:

The start of 2022, like 2021 noticed an uncertain tanker market and thus saw owners reluctant to order new buildings. Even when spot market activity rose sharply in 2022, new ordering was very limited. As per various reports, the year 2022 saw a mere 1.5% increase in the order book. Moreover, a rise in steel prices as well as high-interest rates coupled with an uncertain market witnessed limited new-build orders in near future. This resulted in a hike in asset prices of the existing fleet which was already not very young. Demand & supply will come to par only by the end of the year 2026.

Thus, our understanding is that while TC rates might see a small dip in the first quarter of 2023, overall, we expect the TC rates to be bullish in 2023.

With so many uncertainties and predictions of the looming recession, we think that the year 2023 would be the year of caution and consolidation.

On this note, we want to wish all, A Very Happy New Year.

Mr. Saurabh Gupta is General Manager - Tanker Chartering at BainBridge Navigation. He holds 17 years of experience in the field of Tanker Chartering. His mantra for success is to keep learning and not be afraid of making mistakes but to learn from mistakes.

Source: Press Release