11-01-2017

TANKER SHIPPING MARKET- THE YEAR 2016 & EXPECTATIONS FROM THE YEAR 2017

SushmitBiswas

Following a very good 2015 and beginning of 2016, the year 2016 saw an average reduction in earnings by 40% and asset prices dropping by almost 30% y-o-y. Due to lower bunker price in 2015 the dollar/ton freight in average dropped by 25% across all the sectors. While growth in global sea borne crude remained healthy the demand supply gap for the crude tanker has kept a downward pressure on the tanker market leading to a weaker market. The weak commodity prices marked with geo-political issues led to weaker demand. Some positive impact due to demand in Asian economies China and India in particular, seasonal spikes and lower bunker price only helped the owners maintain a positive ray of hope.  The end of year 2016 pre-holiday season brought some cheers to the market both crude and clean with VLCC earning touching high USD 50,000/day and MR earning touching high teens.  With the asset prices still low traditional ship owners primarily the Greeks and few Indian owners acquired second hand tonnages building up their fleet.   

The year 2017 is marked with uncertainty whether its impact of Brexit, challenges in Chinese economy and halfway round the word the American President , Donald Trump’s pledged reform projects. Opec’s endeavour to prop up oil prices may take a severe beating due to Trump’s promise of opening up of fossil fuel exploration and possible sanctions on Iran. The Indian economy continues to be the bright spot in otherwise bleak global forecast by International monetary Fund (IMF). The OPEC forecast the world economy to grow at 3.5% in 2017 and Indian economy at 7.5% ahead of China to grow at 6.2% in the year 2017.

The oil prices are projected to be driven by volatility owing to high inventories and possible increase in production and due to various complexities involved in agreement among the oil producing nations. The IEA sees the oil demand to be at 1.3mb/d in 2017. The oil price is expected to stay in mid 50’s as per analysts in Goldman Sachs.

The tanker shipping sector is expected to be under downward pressure one due increased bunker price and reduction in dollar/ton rate by around 23% in almost all trading route. The market will be volatile marked with seasonal spikes however the spikes will be short lived due to lack of fundamentals and real demand. The bright side is that the Chinese and Indian crude imports are still projected to rise firmly in 2017, by 8% and 5% respectively. As per shipping analysts the Tanker supply growth is projected to remain firm in 2017. The crude tanker fleet is expected to expand by a robust 4.9%. Overall, as tanker demand growth is expected to be much more limited in 2017, it is likely that, with firm fleet growth, supply-side pressure will remain prevalent. It is expected by the end of year 2017 some stabilisation and direction is found after the impact of Brexit, other political upheaval is absorbed and once remaining Iranian sanctions are lifted.

Source: Mr. Sushmit Biswas

 

About Mr. Sushmit Biswas:

Mr. Sushmit Biswas is C.E.O., Tanker Division of Saigal Sea Trade. He is a shipping professional possessing several years experience working in a variety of roles in the Oil and Gas industry. His specialities include Chartering , Project, Operation.

https://saigalseatrade.com/home.html

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