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Sunday, 11 October 15
TANKER SHIPPING: MORE OPTIMISM IN SIGHT FOR TANKERS IN THE WINTER SEASON - BIMCO
 Demand:
2015 has been the year of the tanker. The fundamental improvements with slow supply-side growth for some years coupled with low oil prices from mid-2014 created strength on both sides. Freight rates started to take off in October 2014 for all types and sizes. The combination of an early start to the fourth-quarter seasonal strength heading into winter and the fact that the oil prices continued to slide became a catalyst.
Throughout 2015, the global refinery throughput has been on a rise. The normal seasonal lower throughput in the first half of the year with widespread maintenance did not occur. Owing to rising and already elevated refinery margins from East to West, refineries simply wanted all the crude oil they could get. This development still provides strong demand and solid freight rates for the tanker industry. In India, we saw a record of 4.74 million barrels per day (mb/d) of crude throughput in June, marking a truly global trend, whereas Middle Eastern refineries also hit a record throughput because of increased runs in Saudi Arabia.
October is traditionally another month of lower throughput as refineries get ready for the winter season when crude runs normally peak. Moreover, the American “Labor Day” on 7 September marks the end of the US driving season which started on Memorial Day, 25 May. This means that the recent 10mb/d production of gasoline will come down.
Some of that weakness may already have caused freight rates to come down sharply, in combination with the global financial uncertainties originating from China. Very large crude Carriers (VLCCs), Suezmax and Aframax have seen freight rates cut in two since mid-June, while Handysize has been the one to drop the most among oil product tankers.
In a rush of excitement, it’s easily forgotten that such high refinery crude runs can only go on for so long, if end consumption supports it. End consumption has supported it some of the way but not all the way. Swollen stocks of crude oil and oil products are now seen everywhere. Preliminary OECD total industry stock change in second-quarter was 1.1mb/d. All stocks but gasoline increased, US crude oil stocks too. In comparison global oil demand dropped by 0.1mb/d over the same period of time and is expected to see an increase of 1.6mb/d to be consumed for the full year over 2014.
Supply:
Contrary to what happens too often, the strong freight markets for oil product tankers have not resulted in a knee-jerk run to the shipyard to order a massive amount of new ships. This stands in opposition to the crude oil tanker orders seen in 2015, as if the lid has come off finally after several years of resisting the temptation.
By end-August 2015, 56 product tankers with a total capacity of 4.8 million DWT, predominantly LR2 (20) and LR1 (21), have been ordered and will be delivered in 2016-17. They are aiming to get a share of the market for longer-haul trades out of Middle East refineries, predominantly into the Western markets. This ordering trend has been on for two years now.
Among the crude oil tanker segments, we have already seen more orders for both Aframax and VLCCs than we did in the whole of 2014. Aframax in particular has been popular with investors this year; after six years with one order a month on average, 2015 has seen 29 new contracts in the first eight months. For the VLCCs, the orders with delivery in particular 2017 (21) and in 2018 (14) have been favoured by investors. In 2015, 50 new VLCC contracts in total have been signed.
One of the launchers which has lifted the freight rates into orbit is two years of very slow fleet growth. Today the fleet holds 648 VLCCs, whereas 628 VLCCs were active by mid-2013. That’s a growth of just 3% in 26 months. Looking forward into the future inflow of crude oil tankers, we can see the delivery pace is picking up and the demolition potential is vanishing with just 14 VLCCs being more than 20 years old and another 16 getting inside the window of the fourth special survey in 2016.
On order for a scheduled delivery during the next 16 months are 71 VLCCs. This means a double-paced inflow as it has taken 34 months for the latest 71 VLCCs to be put into active service.
The change in supply-side conditions will slowly tighten the freight market, and as we look into 2016, the tide could turn fundamentally as a fleet growth of 4.4% is likely to outstrip demand growth. As the coming two years are now “full” in terms of remaining in control of supply-side growth, any additional crude oil tanker orders should be placed for 2018 delivery.
BIMCO forecasts the present and next year supply growth for oil product tankers to be at 5.4% and 5.7% respectively, meaning two “full” years too for that segment.
Outlook:
Looking forward, the winter markets are expected to soften, as the eventual lower refinery crude oil throughput when no more stocks can be filled and margins begin to crumble as demand slips. Until then BIMCO expects earnings for both crude oil and oil product tankers to remain strong. Our expectations are primarily supported by low fleet growth for crude oil tankers and long-haul trades for oil product tankers.
High volatility in freight rates can be expected in the coming half year half a year, when it may also be prudent to look at the time charter market, where one- and three-year time charter rates are both at their highest level since 2009. At USD 48,000 per day and USD 43,500 per day, time charters will make positive returns after all costs inclusive of capital cost and depreciations are deducted.
In the longer run, an eventual repeal of the US crude oil export ban will likely have some impact on the tanker trading lanes. The US congress is set to vote on the issues during this autumn. For the supporters the case is clear: US refineries are saturated with light sweet crude which is produced abundantly. For those in favour of keeping the crude oil export ban still in place there is “national interest”, which currently seems to hold the upper hand. Currently, the only crude oil exports today go to Canada (0.5mb/d).
Moreover, the eventual lifting of international sanctions on Iran is likely to see a steady increase in crude oil, both sweet and sour, into the market over the coming one to three years, depending on much-needed investments to boost production and time to regain market shares. BIMCO expects the re-entry of Iranian crude oil into the market will change trade patterns as other suppliers will be squeezed on their market share. The key will be West African produced sweet crude now going to Europe and East Asia. The latter is the vital one and a stronghold behind the current upturn. The overall impact on the tanker earnings from these changes holds the potential to become both negative and positive.
Source: BIMCO | Hellenic Shipping News
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Wednesday, 11 November 15
Q3' 16 RICHARDS BAY COAL SWAP LOST 15.47% SINCE 6 AUGUST; 18.65% SINCE 6 MAY
COALspot.com: API4 FOB Richards Bay Coal swap for delivery Q1’ 2016 declined week over week and month over month.
The Q1’ 2016 &nb ...
Wednesday, 11 November 15
VESSEL VALUES ARE DOWN BY AT LEAST 20% SINCE MID-AUGUST - INTERMODAL
I had promised not to spend another broker’s insight focusing on the dry bulk side. However, the sale of the M/V Churchill Bulker (179,362 dw ...
Tuesday, 10 November 15
SELF-HEATING OF COAL HAS EMPHASISED THE IMPORTANCE OF CHECKING THE ACCURACY OF SHIPPER'S DECLARATIONS - GARD
Recent incidents involving self-heating of coal has emphasised the importance of checking the accuracy of shipper’s declarations for all type ...
Tuesday, 10 November 15
API 5 FOB NEWCASTLE COAL SWAP SLIDES CONTINUE
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery slid $3.55 per ton (8.50%) month over month to US$ 38.20 per ton. The swap ...
Monday, 09 November 15
BUNKER PRICES TO KEEP SLIDING THIS WEEK, EXPERT SAYS - MARINE BUNKER EXCHANGE
The oil price volatility has continued this week. Two dollars up one day and the next day two dollars down. The oil market has been trading on the ...
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- Madhucon Powers Ltd - India
- Georgia Ports Authority, United States
- Australian Coal Association
- Bangladesh Power Developement Board
- Mercator Lines Limited - India
- Planning Commission, India
- Tata Chemicals Ltd - India
- South Luzon Thermal Energy Corporation
- Bhatia International Limited - India
- Essar Steel Hazira Ltd - India
- IEA Clean Coal Centre - UK
- Attock Cement Pakistan Limited
- Kalimantan Lumbung Energi - Indonesia
- Kumho Petrochemical, South Korea
- Central Java Power - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Salva Resources Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Renaissance Capital - South Africa
- LBH Netherlands Bv - Netherlands
- Singapore Mercantile Exchange
- Chamber of Mines of South Africa
- Commonwealth Bank - Australia
- Wilmar Investment Holdings
- AsiaOL BioFuels Corp., Philippines
- Merrill Lynch Commodities Europe
- Bukit Baiduri Energy - Indonesia
- Jaiprakash Power Ventures ltd
- Directorate Of Revenue Intelligence - India
- Rio Tinto Coal - Australia
- Vizag Seaport Private Limited - India
- Sinarmas Energy and Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- ICICI Bank Limited - India
- Indogreen Group - Indonesia
- GVK Power & Infra Limited - India
- Latin American Coal - Colombia
- IHS Mccloskey Coal Group - USA
- Port Waratah Coal Services - Australia
- Maharashtra Electricity Regulatory Commission - India
- Power Finance Corporation Ltd., India
- Bahari Cakrawala Sebuku - Indonesia
- CIMB Investment Bank - Malaysia
- Semirara Mining Corp, Philippines
- India Bulls Power Limited - India
- Edison Trading Spa - Italy
- Grasim Industreis Ltd - India
- Global Coal Blending Company Limited - Australia
- Independent Power Producers Association of India
- Petrochimia International Co. Ltd.- Taiwan
- Bayan Resources Tbk. - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Indian Oil Corporation Limited
- GMR Energy Limited - India
- Coal and Oil Company - UAE
- Ceylon Electricity Board - Sri Lanka
- The Treasury - Australian Government
- Trasteel International SA, Italy
- Directorate General of MIneral and Coal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Malabar Cements Ltd - India
- Indian Energy Exchange, India
- Uttam Galva Steels Limited - India
- Straits Asia Resources Limited - Singapore
- Global Green Power PLC Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Economic Council, Georgia
- Cement Manufacturers Association - India
- Bhoruka Overseas - Indonesia
- Tamil Nadu electricity Board
- Maheswari Brothers Coal Limited - India
- Bukit Makmur.PT - Indonesia
- Siam City Cement - Thailand
- Krishnapatnam Port Company Ltd. - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kartika Selabumi Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- London Commodity Brokers - England
- Parliament of New Zealand
- VISA Power Limited - India
- Lanco Infratech Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Romanian Commodities Exchange
- ASAPP Information Group - India
- Meenaskhi Energy Private Limited - India
- International Coal Ventures Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PowerSource Philippines DevCo
- San Jose City I Power Corp, Philippines
- CNBM International Corporation - China
- Pendopo Energi Batubara - Indonesia
- Goldman Sachs - Singapore
- Siam City Cement PLC, Thailand
- The State Trading Corporation of India Ltd
- Energy Link Ltd, New Zealand
- McConnell Dowell - Australia
- Kapuas Tunggal Persada - Indonesia
- Timah Investasi Mineral - Indoneisa
- Petron Corporation, Philippines
- Ministry of Mines - Canada
- Baramulti Group, Indonesia
- Interocean Group of Companies - India
- Ministry of Transport, Egypt
- Price Waterhouse Coopers - Russia
- Australian Commodity Traders Exchange
- Parry Sugars Refinery, India
- Thai Mozambique Logistica
- Vedanta Resources Plc - India
- Antam Resourcindo - Indonesia
- Coastal Gujarat Power Limited - India
- Gujarat Electricity Regulatory Commission - India
- Semirara Mining and Power Corporation, Philippines
- Sakthi Sugars Limited - India
- GAC Shipping (India) Pvt Ltd
- Kaltim Prima Coal - Indonesia
- Indonesian Coal Mining Association
- PNOC Exploration Corporation - Philippines
- Leighton Contractors Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Metalloyd Limited - United Kingdom
- Kobexindo Tractors - Indoneisa
- Ind-Barath Power Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Globalindo Alam Lestari - Indonesia
- Simpson Spence & Young - Indonesia
- MS Steel International - UAE
- Holcim Trading Pte Ltd - Singapore
- Kideco Jaya Agung - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Videocon Industries ltd - India
- Dalmia Cement Bharat India
- Alfred C Toepfer International GmbH - Germany
- Central Electricity Authority - India
- Borneo Indobara - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Standard Chartered Bank - UAE
- White Energy Company Limited
- Bharathi Cement Corporation - India
- Therma Luzon, Inc, Philippines
- Carbofer General Trading SA - India
- Bhushan Steel Limited - India
- Marubeni Corporation - India
- Savvy Resources Ltd - HongKong
- Coalindo Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Formosa Plastics Group - Taiwan
- Mercuria Energy - Indonesia
- Larsen & Toubro Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Energy Development Corp, Philippines
- Minerals Council of Australia
- Toyota Tsusho Corporation, Japan
- Agrawal Coal Company - India
- New Zealand Coal & Carbon
- Sarangani Energy Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Sindya Power Generating Company Private Ltd
- Karaikal Port Pvt Ltd - India
- Riau Bara Harum - Indonesia
- SMG Consultants - Indonesia
- Eastern Energy - Thailand
- Electricity Authority, New Zealand
- Banpu Public Company Limited - Thailand
- Mintek Dendrill Indonesia
- Wood Mackenzie - Singapore
- Kepco SPC Power Corporation, Philippines
- Sical Logistics Limited - India
- PTC India Limited - India
- Sojitz Corporation - Japan
- Aboitiz Power Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- Iligan Light & Power Inc, Philippines
- Mjunction Services Limited - India
- Ministry of Finance - Indonesia
- Eastern Coal Council - USA
- Samtan Co., Ltd - South Korea
- TeaM Sual Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Miang Besar Coal Terminal - Indonesia
- SMC Global Power, Philippines
- Altura Mining Limited, Indonesia
- Aditya Birla Group - India
- Africa Commodities Group - South Africa
- Oldendorff Carriers - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bulk Trading Sa - Switzerland
- Xindia Steels Limited - India
- Sree Jayajothi Cements Limited - India
- The University of Queensland
- Medco Energi Mining Internasional
- Star Paper Mills Limited - India
- Heidelberg Cement - Germany
- Meralco Power Generation, Philippines
- Electricity Generating Authority of Thailand
- Manunggal Multi Energi - Indonesia
- OPG Power Generation Pvt Ltd - India
- Makarim & Taira - Indonesia
- Anglo American - United Kingdom
- Barasentosa Lestari - Indonesia
- Chettinad Cement Corporation Ltd - India
- Gujarat Sidhee Cement - India
- Indika Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Orica Australia Pty. Ltd.
- Ambuja Cements Ltd - India
- Indo Tambangraya Megah - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Intertek Mineral Services - Indonesia
- Orica Mining Services - Indonesia
- Posco Energy - South Korea
- SN Aboitiz Power Inc, Philippines
- Thiess Contractors Indonesia
- Global Business Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Deloitte Consulting - India
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