Better days for product tankers demand, but future still perilous.
Among the subsectors of the tanker market, the product tanker market, a place where there were many Hellenic ship owners placing their bets in the past few years, appears to not be out of the blue yet. In its full 2009 results report, one of the company"s active in this market, Italy"s d"Amico International Shipping warned investors that while the market has recovered from a dismal ? for the most part ? 2009, this uptrend is still quite fragile, thus it"s quite cautious on the future. The company said that at the end of the past year and the beginning of 2010, the improvement noticed in the global economy, coupled with very cold winter conditions, across the Northern Hemisphere, saw an increase in demand, shich in turn was directly reflected in an improvement of demand for oil products. But, the company also warned that this improvement isn"t significant compared to previous years and is also quite fragile as global economies gradually improve.
?The key drivers that should affect the product tanker freight markets in 2010 and d"Amico International Shipping performances are global oil demand and worldwide GDP growth and the large influx of new buildings scheduled for 2010?, the company said, further analyzing the factors which are expected to have an impact on demand this year. In DIS" analysis ?the best indicator of Product Tanker earnings on the spot Market demand is the assessed Time Charter rate for one year Charter. According to ICAP Shipbrokers, ACM Shipbrokers and Clarksons Shipbrokers the assessed Time Charter rates has risen some 15-20 percent since the end of Q3 2009. Albeit these levels cannot be considered high based on historical levels, however the percentage increase is significant. This in itself indicates an upturn in Spot market demand
There are still significant investments in refinery capacity in the coming years primarily within the Asian region, which should result in increased tonne mile demand; according to the IEA, refinery capacity is expected to increase by 8.7 million barrels per day for the period 2008-2014, of which over half is in Asia. Any new refining projects seem to be dominated by the Middle East, China and other Asia countries. Refinery closures and reduced output have already occurred within 2009, predominately within the OECD. New low-cost capacity in Asia will increasingly force a rationalisation of old high-cost capacity in the west, structurally favouring more long haul products trade. So as tonne mile demand increases this should have a positive effect on product tanker demand. The tonne mile demand has increased within Asia throughout 2009 as demand has improved predominately within this region. There is still expected further long haul seaborne growth in other commodities such as palm oil and vegetable oil. These products can only be carried on IMO classified vessels which should Increase demand for these types of vessels. A further tightening of vetting and screening procedures from oil companies, favouring modern, double hull vessels operated by owners with full in-house ship-management and crewing.
In terms of supply DIS mentioned the following: ?the forward net growth of ships entering the Product Tanker market is growing but not at anything like the pace expected on paper; A number of ships which were scheduled to be delivered in 2009, considered one of the biggest delivery years in recent history, were not and some will not be delivered this year. They have been deferred, delayed, cancelled or converted into a different ship type/size; ? The number of Ships in the 25-55,000 deadweight segment that were ?not Delivered? in 2009 according to SSY, Clarkson"s, and ICAP Shipbrokers runs between 25 and 30 percent. The actual figure that has been deferred or delayed into 2010 will become apparent throughout the year. However with such a relatively large percentage it is safe to assume a certain amount of these deliveries has in fact been cancelled. In this respect the question whether or not financing has been secured for forward deliveries is significant!
2010 April is the deadline for IMO phase out of the remaining single hull vessels from international trade. There is speculation that some ships will be able to circumnavigate the deadline due to further trading be it coastwise or storage is valid however we believe the figure will be not significant. Scrapping of Tankers in 2009 and year to date has now overtaken total for 2008 by almost fifty percent according to RS Platou.
There are two other factors that even today positively reduce the supply of Tankers. Firstly despite the increased investment in New Tankers there has not been any significant investment in Port Infrastructure that has led to increased Port stays and delays and thus reduced Supply. The fact that a large number of owners have introduced slow steaming due to high Bunker prices and the poor demand has also reduced the supply of Ships, concluded the Italian ship owners.