VLCCs and MR product tankers have been the “weapon of choice” among ship owners looking to make plays in the tanker market. Despite the geopolitical and financial uncertainties which are having an adverse effect on the shipping markets, a lot of ship owners have sought to conclude deals in the tanker market, taking advantage of lower asset values. In its latest weekly report, shipbroker Allied Shipbroking said that “2019 will be a significant year for the fleet development in the tanker segments, as sentiment in the market has improved and expectations are now more bullish than a year ago, despite the recent freight market correction. All this has translated into 141 new contracts being reported in 2018 and a total orderbook of 518 for both crude and product carriers. This increased appetite amongst owners in both the crude and products space has mainly focused up till now in the VLCC and the MR segments”.
According to Allied’s Research Analyst, Mr. Yiannis Vamvakas, “in the crude oil market, it looks as though owners have not been discouraged by the increased uncertainty witnessed recently by the various geopolitical tensions. Market participants expect that demand for crude oil will increase soon, with the International Energy Agency forecasting a 1.4 million bpd growth for 2019, 0.1 million bpd more than in 2018. Meanwhile, news regarding US oil shipments heading to China are helping further boost confidence that a deal is close to being reached by the two. Up to now, 17 new contracts for VLCCs have been placed within 2019 and added to the existing orderbook which is currently standing at 114 vessels. In comparison, during the same period back in 2018, new orders for VLCCs had not even reached double digits. The majority of these new orders have been secured by South Korean shipbuilders (9 out of the 17 new orders). In addition to these VLCC orders, we have seen orders for 3 Suezmax vessels surface so far in 2019, while in sharp contrast, there have been no confirmed new orders for Aframax vessels in 2019, with the last reported order being back in October 2018. Shipbuilders, having witnessed the rising appetite for new orders in the crude oil space, have already pushed for higher prices, with the average newbuilding price for a VLCC being quoted now at around US$ 93 million, US$ 4.5 million higher compared to the average price noted back in 2018”, he said.
Vamvakas added that “on the product tanker side, orders for 13 new MRs have been signed this year, with 10 of them being ordered in South Korea and 3 of them in Russia. The oil products trade growth that is expected to be seen during the latter half of the year (due to the IMO 2020 regulation) has played an important role in the boost in new orders. New products will need to be produced and distributed across the different bunker markets worldwide, with a fair increase in tonnage likely to be needed in order to cover this increased demand. It is worth mentioning that 3 of these MR carriers were ordered by Russian interests and will use LNG as their main fuel. Beyond this, expectations seem to hold no that the orderbook for product tankers will continue to grow within the year, while at the same time 127 vessels are currently scheduled to be delivered within this year. Both LR1 and MR newbuilding prices have increased considerably against what we were seeing back in 2018, climbing by US$ 2.5 million and US$ 1 million compared to their respective last year average levels”.
“The global developments, including Iran sanctions and the US-China trade war, will define the level of uncertainty noted in the market during the year. Meanwhile, things will start to clear with regards to how prepared oil refineries really are for the upcoming IMO 2020 regulation and how many vessels will eventually be equipped with scrubbers by the time the regulation comes into full enforcement. To what extent things will clear up in this regard and opportunities begin to be more well defined will determine the level of renewed interest that will emerge amongst owners during the rest of the year”, Allied’s analyst concluded.
Source: Hellenic Shipping News.