Product tanker have been the "stars" of the tanker market for the past few months; and with good reason. A stronger oil products trade has monopolized discussion among market delegates, who are gradually shifting their attention away from the huge crude oil trade of the past. At the same time, the IEA (International Energy Agency) has been forecasting a falling crude trade over the next five years, which it claims will be more than offset by the growth in trade for refined products. This shift away from crude oil and towards refined oil products such as gasoline and diesel has even grabbed the attention of both oil majors as well as independent trading houses that have already started to take serious positions in this rapidly growing sector.
According to a recent monthly report from Intermodal's Research Analyst, Mr. George Lazaridis, "historically, this sector may have never really had its day in the sun. This all looks to be changing now. In the Pacific Rim we have seen a rapid change in the main suppliers and their market share, as well as demand increases which are being fed from non-oil products. An example of this is the added boost presented by increased demand coming in from Palm Oils. Although this is typically for the smaller size products tankers, it still manages to take up a significant portion of the fleet" he said.
Lazaridis went on to note of the whole situation in Japan, "where ever since the earthquake of 2010 has been relying more heavily on im-ports of energy products such as oil in order to cover the still prevail-ing energy production gap left behind by the closure of its nuclear reactors. What’s more is that there hasn’t been any huge change in refining capacity in Japan, which leaves for an even higher increase in growth for oil-product imports, compared to the increase in crude oil imports. The third part to this supply mix is the continual shifting of refineries. There has been a significant increase in construction of new refining capacity in oil producing regions, with many of these regions trying to add further value to their natural resources before sending them out as exports. At the same time and with Far Eastern Countries such as China becoming ever larger import player in the oil trade, Singapore, the main refining hub of the East is further increas-ing its refining capacity and attracting demand both due to location as well as the economies of scale and lower costs offered by its larg-er and more modern refineries", he stated in his analysis.
Of course, while all appears to be well and good from the demand side for product tankers, "however, it's also been the restricted supply of vessels that has played a major role in determining how the market will move. The MR sector for one has been the slowest growing amongst the main tanker segments in terms of both number of vessels and capacity over the past 5 years. This all will change very soon as the extravagant new orders that have been placed over the past twelve months or so have left this segment with the largest orderbook to fleet ratio (15%). The fleet is estimated to increase by around 6% this year, while next year things will speed up a bit with a delivery schedule equal to 7% of the current active fleet. This is still not that much larger than the current growth in ton-mile demand, yet it is signifi
cant enough to dampen the momentum created and keep earnings at their current levels", Intermodal's analyst noted.
He added that "what is more worrying is that there is still significant demand out there for further new orders. And had it not been for most of the early delivery slots been taken up in yards which specialize in this sector, we might have seen a significantly higher number of vessels being penned. More so, as charterers have already started to shun away from overage units (+15 year old) and with 321 vessels built prior to 1997, it won’t be the newly builds that will face oversupply problems. So there you have it, the most promising market out there in the tanker sector and one that has been on the spotlight for much of 2012 and 2013 but how much more steam is there left to keep things moving forward. Rates are still holding fairly positive but with supply of vessels also keeping in suite it doesn’t seem as though will see an overly bullish market any time soon, but compare that to the bears of the VLs and Suezmaxes and the choice for a tanker owner can’t become more clear than that", Lazaridis concluded.