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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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Sunday, 20 September 15
BALTIC CAPE INDEX ROSE 66.52 PER CENT AND STAND NOW AT 1995 POINTS
COALspot.com: The BDI (Baltic Dry Index) rose 17.35 per cent week over week to 960 points on Friday mainly driven by the Capesize segment. The Cape ...
Friday, 18 September 15
SHIPPING AND THE FED RATE DECISION: FINANCING COSTS COULD RISE EVEN HIGHER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Regardless of the FED’s decision to raise rates, shipping stands to be influenced by the decision. Shipbroker Allied Shipbroking noted this w ...
Friday, 18 September 15
U.S. COAL PRODUCTION DECLINED 6.7 PER CENT W-W: EIA
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 17.4 million shor ...
Thursday, 17 September 15
COALSPOT HAS LAUNCHED NEW THERMAL COAL INDICES FOR INDONESIAN COAL
COALspot.com has today launched real-time CS (i) Coal Indices.
The Indices represents 3800 kcal/kg GAR, 4200 kcal/kg GAR, 5000 kcal/kg GAR a ...
Thursday, 17 September 15
LOW DEMAND PUSH COAL SWAP DOWN
COALspot.com: Indonesian coal swap for delivery 4Q 2015 declined month on month and gain week over week.
The 4Q swap declined $ 1.77 (-4.17%) ...
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- MS Steel International - UAE
- The State Trading Corporation of India Ltd
- Maheswari Brothers Coal Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- White Energy Company Limited
- Iligan Light & Power Inc, Philippines
- Central Java Power - Indonesia
- Chettinad Cement Corporation Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bhatia International Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- London Commodity Brokers - England
- Vizag Seaport Private Limited - India
- Xindia Steels Limited - India
- Kobexindo Tractors - Indoneisa
- Dalmia Cement Bharat India
- Aboitiz Power Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- Energy Development Corp, Philippines
- Wood Mackenzie - Singapore
- Semirara Mining Corp, Philippines
- Directorate Of Revenue Intelligence - India
- McConnell Dowell - Australia
- Oldendorff Carriers - Singapore
- Posco Energy - South Korea
- SMG Consultants - Indonesia
- Indo Tambangraya Megah - Indonesia
- Marubeni Corporation - India
- Bhushan Steel Limited - India
- Thiess Contractors Indonesia
- Bukit Baiduri Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Central Electricity Authority - India
- Metalloyd Limited - United Kingdom
- Pendopo Energi Batubara - Indonesia
- Jindal Steel & Power Ltd - India
- Tata Chemicals Ltd - India
- Deloitte Consulting - India
- Sree Jayajothi Cements Limited - India
- Salva Resources Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Savvy Resources Ltd - HongKong
- Bayan Resources Tbk. - Indonesia
- Georgia Ports Authority, United States
- Global Coal Blending Company Limited - Australia
- Sinarmas Energy and Mining - Indonesia
- Baramulti Group, Indonesia
- Ministry of Transport, Egypt
- Straits Asia Resources Limited - Singapore
- Independent Power Producers Association of India
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- Krishnapatnam Port Company Ltd. - India
- Tamil Nadu electricity Board
- Offshore Bulk Terminal Pte Ltd, Singapore
- Latin American Coal - Colombia
- Coal and Oil Company - UAE
- Romanian Commodities Exchange
- Kohat Cement Company Ltd. - Pakistan
- IHS Mccloskey Coal Group - USA
- Bharathi Cement Corporation - India
- Cement Manufacturers Association - India
- Holcim Trading Pte Ltd - Singapore
- Goldman Sachs - Singapore
- ASAPP Information Group - India
- Borneo Indobara - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- India Bulls Power Limited - India
- Merrill Lynch Commodities Europe
- San Jose City I Power Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement PLC, Thailand
- Wilmar Investment Holdings
- Manunggal Multi Energi - Indonesia
- South Luzon Thermal Energy Corporation
- Samtan Co., Ltd - South Korea
- Simpson Spence & Young - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Star Paper Mills Limited - India
- GAC Shipping (India) Pvt Ltd
- Rio Tinto Coal - Australia
- Kartika Selabumi Mining - Indonesia
- Global Green Power PLC Corporation, Philippines
- Mintek Dendrill Indonesia
- Energy Link Ltd, New Zealand
- Riau Bara Harum - Indonesia
- Barasentosa Lestari - Indonesia
- Ministry of Mines - Canada
- Indogreen Group - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Carbofer General Trading SA - India
- Aditya Birla Group - India
- OPG Power Generation Pvt Ltd - India
- PTC India Limited - India
- Karaikal Port Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Uttam Galva Steels Limited - India
- Ambuja Cements Ltd - India
- Power Finance Corporation Ltd., India
- IEA Clean Coal Centre - UK
- Medco Energi Mining Internasional
- Bhoruka Overseas - Indonesia
- Minerals Council of Australia
- Price Waterhouse Coopers - Russia
- Gujarat Mineral Development Corp Ltd - India
- Binh Thuan Hamico - Vietnam
- Eastern Coal Council - USA
- VISA Power Limited - India
- Chamber of Mines of South Africa
- Kideco Jaya Agung - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Antam Resourcindo - Indonesia
- CIMB Investment Bank - Malaysia
- Planning Commission, India
- Sindya Power Generating Company Private Ltd
- Petron Corporation, Philippines
- Renaissance Capital - South Africa
- Trasteel International SA, Italy
- ICICI Bank Limited - India
- Larsen & Toubro Limited - India
- Global Business Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Bulk Trading Sa - Switzerland
- Africa Commodities Group - South Africa
- Thai Mozambique Logistica
- Mercator Lines Limited - India
- Indonesian Coal Mining Association
- Banpu Public Company Limited - Thailand
- Directorate General of MIneral and Coal - Indonesia
- Mercuria Energy - Indonesia
- GVK Power & Infra Limited - India
- Ind-Barath Power Infra Limited - India
- Miang Besar Coal Terminal - Indonesia
- Eastern Energy - Thailand
- Jorong Barutama Greston.PT - Indonesia
- CNBM International Corporation - China
- Kumho Petrochemical, South Korea
- Singapore Mercantile Exchange
- Port Waratah Coal Services - Australia
- Agrawal Coal Company - India
- Sojitz Corporation - Japan
- Orica Mining Services - Indonesia
- Interocean Group of Companies - India
- The University of Queensland
- Kalimantan Lumbung Energi - Indonesia
- Ceylon Electricity Board - Sri Lanka
- AsiaOL BioFuels Corp., Philippines
- Edison Trading Spa - Italy
- Timah Investasi Mineral - Indoneisa
- Heidelberg Cement - Germany
- Mjunction Services Limited - India
- Meenaskhi Energy Private Limited - India
- SMC Global Power, Philippines
- Anglo American - United Kingdom
- Parliament of New Zealand
- Toyota Tsusho Corporation, Japan
- PowerSource Philippines DevCo
- Essar Steel Hazira Ltd - India
- Indika Energy - Indonesia
- GMR Energy Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Globalindo Alam Lestari - Indonesia
- Electricity Generating Authority of Thailand
- Coastal Gujarat Power Limited - India
- Malabar Cements Ltd - India
- Makarim & Taira - Indonesia
- Australian Coal Association
- Parry Sugars Refinery, India
- Sakthi Sugars Limited - India
- Videocon Industries ltd - India
- Economic Council, Georgia
- Orica Australia Pty. Ltd.
- Formosa Plastics Group - Taiwan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indian Oil Corporation Limited
- Bank of Tokyo Mitsubishi UFJ Ltd
- Gujarat Sidhee Cement - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Vedanta Resources Plc - India
- SN Aboitiz Power Inc, Philippines
- Sical Logistics Limited - India
- Meralco Power Generation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Grasim Industreis Ltd - India
- Standard Chartered Bank - UAE
- Kepco SPC Power Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Kaltim Prima Coal - Indonesia
- Electricity Authority, New Zealand
- International Coal Ventures Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- PNOC Exploration Corporation - Philippines
- Attock Cement Pakistan Limited
- LBH Netherlands Bv - Netherlands
- Australian Commodity Traders Exchange
- Indian Energy Exchange, India
- New Zealand Coal & Carbon
- Ministry of Finance - Indonesia
- The Treasury - Australian Government
- Karbindo Abesyapradhi - Indoneisa
- Intertek Mineral Services - Indonesia
- Commonwealth Bank - Australia
- Coalindo Energy - Indonesia
- Madhucon Powers Ltd - India
- Lanco Infratech Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Altura Mining Limited, Indonesia
- Bangladesh Power Developement Board
- Leighton Contractors Pty Ltd - Australia
- Siam City Cement - Thailand
- TeaM Sual Corporation - Philippines
- Jaiprakash Power Ventures ltd
- European Bulk Services B.V. - Netherlands
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