According to New York broker, Poten & Partners, the last VLCC contract was placed in June 2021, followed a month later by the last Suezmax order. No new panamax tankers or LR1 tonnage have been ordered since April 2020 and only six Aframax/LR2s and seven MRs have been ordered so far this year, the broker said.
The tanker market is fraught with uncertainty. Not only do owners face prices up by close to 20-30% on first-half 2021 prices, but there is uncertainty on propulsion type and, of course, bigger questions about the future of tanker shipping generally as the world’s decarbonisation drive becomes more urgent.
“There is the general expectation that global oil demand (and its transportation) will likely peak within the nest 10-20 years,” Poten said in its most recent weekly Tanker Opinion.
For a shipowner, that is not a strong incentive to invest in an asset that has a 20-year life. Especially, if (in the case of a VLCC) it is 28% more expensive than last year and you won’t get it delivered for at least another two years.”
That explains why tanker owners are targeting secondhand tonnage. A secondhand tanker is cheaper (in relative terms), Poten said, and can be employed in today’s rising market immediately.
Noting that Greek and Chinese owners have been particularly active as both buyers and sellers, the broker said: “Buyers want to expand or renew their fleet to take advantage of rising rates, while sellers see an opportunity to shed older assets at attractive prices and/or realise some gains on previously acquired tonnage.”
Russian tanker PRIMORYE was arrested by the Malaysian Maritime Enforcement Agency (MMEA) on Aug 21 24nm off the coast of Tanjung Sedili, Kota Tinggi District, Johor, Malaysia, Singapore and Singapore Strait outer Anchorage, South China sea. It’s so to say, routine arrest and routine accusation – the ship anchored without obtaining official permission, though nobody so far, explained the necessity of coastal State permission to anchor outside its’ territorial waters. Tanker will be released, judging from countless other arrests of this type, after paying a “fine”. Tanker anchored off Singapore on Aug 19, having a status of “Waiting for Orders”.
The Baltic Exchange’s main sea freight index was little changed on Tuesday as declines to multi-week lows in the panamax and supramax segments countered gains in capesize rates.
The overall index, which factors in rates for capesize, panamax, and supramax shipping vessels, edged down two points to 1,564 points.
The capesize index was up for the second session, gaining 45 points, or 3.1%, at 1,510 points.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were up $369 to $12,521.
“The Pacific market seems to be the one under most pressure, having witnessed a week-on-week correction of 50%, given the losing sentiment, coupled with the excess tonnage capacity in the area,” said Thomas Chasapis, analyst at Allied Shipping, in a weekly note on Monday.
The panamax index was down for the 11th straight session, shedding 20 points, or 1%, at a three-week low of 1,938 points.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased $180 to $17,444.
Two more grain-carrying ships left Ukraine’s Chornomorsk port, Turkey’s defence ministry said, as part of a deal to unblock Ukrainian sea exports, bringing the total to leave the country under a safe passage deal to 12.
Ships exporting grain through the Black Sea will be protected by a 10 nautical mile buffer zone, according to long-awaited procedures agreed by Russia, Ukraine, Turkey and the United Nations on Monday.
The supramax index fell 35 points to 1,636 points, its lowest since Feb. 4.
Source: Reuters (Reporting by Deep Vakil in Bengaluru; Editing by Shailesh Kuber)
he latest bullish report comes from Castor Group in the US, who forecasts vessel supply destruction for large crude tankers to be among the largest ever recorded in the coming few years, second only to the period following the re-opening of the Suez Canal in 1976.
“Obsolete tonnage will not be replaced in the foreseeable future by new buildings as the last few years’ skyrocketing costs and the lack of feasible alternative fuel technologies have caused the longest hiatus of newbuilding orders in almost 40 years,” Castor analysts noted.
A structural bull market lasts for a long time and provides for a time tested and profitable investment strategy
Castor data suggests that at the end of 2025, almost 25% of current aframax supply will be lost. Moreover, in only one year’s time, the VLCC sector is expected to shed 6% of its vessel supply, while the Suezmax sector will lose almost 9% of its tonnage capacity.
The Ukrainian war has caused significant changes in trade patterns in all three crude sectors, resulting in large increases in vessel demand. Since early June, volumes in the VLCC sector are ahead 33.3% and actual vessel demand has risen 30%, according to Castor. The fleet has also become significantly more geographically fractured which in conjunction with higher vessel demand, have pushed earnings almost $35,000 per day higher. During the same time, global suezmax vessel demand has jumped 20% with increases recorded in most export regions. Geographical fragmentation of the fleet has also provided support for higher earnings. Aframax vessel demand rose almost 24% during the same time with the vast majority of increases recorded in the West.
Tankers, Castor argued, are in the early stages of a structural bull market.
“While no bull market follows a straight linear path higher, a structural bull market lasts for a long time and provides for a time tested and profitable investment strategy; buy dips,” Castor advised.
In a widely read recent report entitled ‘Medium-term tanker fleet fundamentals to support a golden age’, brokers BRS looked at the low tanker orderbook, something it said was down to a combination of a tanker market in the doldrums, technological uncertainty and high shipbuilding prices.
“It is becoming extremely difficult for an owner to today place a tanker order at a shipyard with a proven track record for building tankers, for delivery before 4Q25,” BRS stated, predicting that this should see the VLCC fleet contract by 1-2% per annum over 2024-26.
Joakim Hannisdahl, who oversees the Cleaves Shipping Fund, wrote earlier this week of the start of the long-awaited cyclical expansion in oil tankers.
“We now see a dual positive effect on tanker demand due to implications from the invasion and from a general improvement in global oil supply,” Hannisdahl wrote, going on to discuss the very low orderbook.
Norwegian bank DNB has also turned bullish. In a report issued at the end of last month, DNB stated it saw considerable upside potential for many of the tanker stocks it covers.
“As the earnings inflection point appears to be nearing, we have upgraded most of them to buy,” DNB stated.
“We find all-time low orderbook-to-fleet ratios of 5.1% for crude tankers and 4.7% for product tankers, versus high average fleet ages of 11.3 years and 12.1 years, respectively. Against a tightening regulatory backdrop and higher fuel costs, this should offset part of the already limited deliveries and we forecast 2.9% average supply growth for crude tankers and 3.1% for product for 2022–2025e,” the DNB report forecasted.
DNB’s rate forecasts have been substantially upgraded and now stand at $41,400 a day for 2023, $54,400 a day for 2024 and $60,700 a day for 2025 for VLCCs and $23,600 a day, $26,500 a day and $26,800 a day for modern MRs, respectively.
Based on these rate estimates, DNB sees a 13% upside potential to average secondhand VLCC values one year forward, with a five-year old VLCC valued at $93m versus today’s quote of $82m. For MRs, DNB sees 18% upside potential on average, and values a five-year old at $40m one year forward – 20% above the $33.5m current broker quote.
VLCC newbuilding prices have increased from $88.4m in January 2021, to $119m, an increase of 35%, according to the New York-based tanker broker Poten & Partners. Secondhand prices have shown a similar trend. The last time asset prices increased like that was during the tanker supercycle from 2004 to 2008.
So far, newbuilding prices have increased faster than secondhand values in the current cycle. However, Poten argued in its most recent weekly report that this will likely change if rates continue to recover.
Talking changing tanker prospects yesterday was Hugo De Stoop, the boss of Euronav, one of the world’s largest tanker players. Unveiling Q2 results, De Stoop discussed the ongoing counter-seasonal recovery in the markets
“Recent trading data points – such as China’s return to crude procurement, vessel supply metrics and improved oil supply – have underpinned a recovery in the freight markets which is unusual for the season. Euronav is ideally placed to benefit from the shorter-term cyclical recovery but also the robust medium-term fundamentals of our market,” De Stoop said.
The counter-seasonal run comes despite falling demand in key market, the US.
“Demand destruction is by now a reality in much of the Western world, most visibly witnessed in the US with the Energy Information Administration releasing figures showing implied demand for gasoline plunging by 7% last week to just over 8.5m barrels per day, around 11% under the five-year average for this time of the year, even as prices at the pump are coming off fast,” a markets update from Norwegian broker Lorentzen & Co today stated.
However, there are wide differences between the Western Hemisphere and the European continent, propping up the tanker markets, both for crude and products.
“While the US is seeing plenty of extra crude as a result of refineries accepting lesser volumes amidst higher domestic production and releases of the Strategic Petroleum Reserves, Europe is more hungry than ever for supplies, not only for crude but also for distillates,” analysts at Lorentzen & Co pointed out.
The Coast Guard said Hafnia’s 2008-built tanker discharged oil into the Mississippi River near Kenner, Louisiana, outside of New Orleans in the United States.
Coast Guard Sector New Orleans was alerted to the oil spill Friday evening (29 June) local time and said the oil spill occurred during a fuelling operation with a fuel barge at Ama Anchorage at mile marker 115. Coast Guard pollution responders attended the scene on the West Bank of the Mississippi River.
“The crew of Hafnia Rhine secured the oil discharge, but Sector New Orleans pollution investigators estimate up to 9,500 litres of fuel oil entered the water and contaminated approximately 50-60 barges in the vicinity,” the Coast Guard said.
Hafnia released a statement regarding the incident.
“When the alarm was raised, there was an emergency stop on all bunkering operations. The crew immediately activated the Vessel Response Plan to limit any further loss of fuel. Regrettably, an undetermined amount spilled onto the deck, with a quantity lost overboard into the water. The crew isolated and cleaned the affected area on the deck of the ship,” the Hafnia statement said.
“The United States Coast Guard, flag state (Singapore), together with all relevant authorities and parties, were notified immediately and the vessel mobilised its Qualified Individual incident response service, with a professional spill response team on scene. Hafnia is working with [US] federal and state agencies in the ongoing clean-up operation under an approved plan.”
Oil spill removal contracts were awarded to the National Response Corp and Environmental Safety and Health Consulting Services. The Coast Guard reported the organisations have placed 823 m of containment booms and 1,012 m of sorbent booms (made from absorbent material that soaks up oil, but not water) around the affected area including the contaminated vessels and have utilised additional sorbent materials to recover the oil product.
The Coast Guard said it is “committed to overseeing a timely cleanup of oil to mitigate environmental impacts through its co-ordination with partner agencies and the continued assessment of shorelines and waterways”.
There have been no reports of impact to wildlife, and the cause of the discharge remains under investigation, according to the Coast Guard.
The Singapore Flagged vessel, Hafnia Rhine spilled over 2000 gallons of fuel oil in the Mississippi River during a fueling operation, per the US Coast Guard.
The spill occurred at the Ama Anchorage, situated west of the Jefferson Parish Line and twenty miles from New Orleans. According to officials, the accident occurred on Thursday, at 6 pm.
The crew members of the ship succeeded in stopping the spill from spreading further however by that time, around 50 to 60 barges had been contaminated by the vast amount of oil released into the river.
Bystanders called the Coast Guard and oil spill removal organizations hurried to the scene for containing the hazard and assessing its environmental impact.
Per the Coast Guard, the National Response Co. and Environmental Safety and Health Consulting Services were called to tackle the spill.
According to officials, around 6000 feet of floating barriers, including a 2700 feet containment boom and 3200 feet sorbet boom have been put in place for containing the oil spill.
The impact on the nearby environment is still unclear. However, no significant harm was noticed to local marine life during mitigation efforts. Other agencies are analyzing the coastlines and inland water channels to fully comprehend the impact of the oil spill, said the officials.
The cause of the oil spill is yet to be determined.
Russian and Chinese tankers are carrying out high risk ship-to-ship crude oil transfers at a newly established spot in the middle of the Atlantic Ocean, it has been revealed.
Analysis has tracked at least a dozen tankers involved in transferring or receiving crude oil of Russian origin, which then set sail for destinations in Asia, particularly China.
The transfers, which are taking place about 1,480 kilometres off the Portuguese coast, have raised concerns of an accident at sea with economic or ecological implications.
The research was carried out by the Lloyd’s List, a long-running shipping journal that provides insight into maritime and associated data from around the globe. It says that the ship-to-ship transfer hub represents a case of owners taking “big risks for big money”.
Experts believe mid-Atlantic ship-to-ship transfers would pose a major logistical challenge to crew members and jeopardise their safety at sea. Such transactions could also allow for the trading of oil from blacklisted nations.
At the core of the operation is a cluster of five Chinese-owned boats, which were set up under separate company names but registered at the same address.
The Lloyd’s report says Russian energy giants Gazprom and Lukoil have chartered most of the outbound ships which load from Baltic and Black sea ports, including Primorsk and Ust-Luga.
The report claims an additional 12 tankers may have been involved in the operation, but cannot be traced as their identification systems were switched off.
Alex Glykas from Dynamarine says the practice has never been seen before in the Atlantic, in part because a smooth transfer relies on the weather being “ideal”, an infrequent scenario in the area.
He says ships taking part in this kind of practice could easily be damaged, potentially leading to oil spills.
“The way that the industry has been structured, it assists opportunities because there is no proper surveillance, it’s as simple as that,” he said. “Shipowners who want to take big risks, they make big money and there are traders that support them.”
Lloyd’s List claims the practice is carried out in combination with a series of other “deceptive shipping practices”, which are designed to “obfuscate the origin and destination of the cargo, as well as the ownership and identify of any vessels involved”.
The journal says there already about 200 ageing oil tankers in the oceans which are involved in shipping 1.2 million barrels per day from countries under sanction, including Iran and Venezuela.
The transfers allow traders to mix their load with other crude oil types which can lead to false claims that a cargo on board could be, for example, ‘Malaysian Blend’ to circumvent sanctions.
Source: The National
Tanker values have surged to decade highs, on the back of strong earnings in the spot market. In its latest weekly report, shipbroker Gibson said that “over the past few years tanker owners have watched containership values surge to unbelievable levels, whilst their own values have struggled against a backdrop of weaker transportation fuel demand following the pandemic. However, gradually recovering oil consumption and the fallout of Russia’s aggression in Ukraine has propelled spot earnings and with that, secondhand values to levels not seen in over a decade. Newbuild prices had already firmed due to tighter yard availability and cost inflation; however, secondhand prices, which are more closely linked to near term spot market developments, only started to gain momentum at the end of last year, partly supported by increased optimism around oil demand and declining orderbook. Long delivery lead times, uncertain regulations and high yard pricing have also made secondhand tonnage a more attractive proposition, given the shorter investment timeline and prompter delivery a secondhand vessel offers. So, what factors might support further rises in values, or is the bubble about to burst?”
Source: Gibson Shipbrokers
According to Gibson, “for context, secondhand (basis 5 years old) MR values faced a downward trend through much of 2020, before stabilising in 2021 and growing impressively from $29 million in December to $34m at the time of writing. In fact, $34m for a 5 year old MR tanker today exceeds the price of a newbuild MR back in January 2021, and overall represents a 17% increase in the last 18 months. Aframaxes have shown even more impressive price rises, with a 5 year old values rising 50% since January 2021 to $51m to exceed newbuilding prices seen in early 2021”.
The shipbroker added that “yet prices could still be driven higher. Clearly, asset values will remain supported whilst the spot markets continue to be exceptionally strong. However, other factors could be equally as impactful. The implementation of a Russian oil embargo and a corresponding Western insurance ban will prevent many owners currently willing to transport Russian oil from doing so. As we move closer to December, it is likely that increased S&P activity will occur for buyers based in Russia, the Middle East and Asia, which will continue to support prices and mark a continuation of a trend already seen since the invasion”.
“Conversely, any easing of sanctions against Iran or Venezuela could have the opposite effect. If sanctions against these countries were to be removed, much of the current fleet servicing these trades could migrate into Russian business – again another trend observed to some extent already. There is also the question as to whether Europe has the resolve to press ahead with its Russian oil embargo and insurance ban at the end of the year, having recently softened current sanctions relating to Russian energy exports. Such an embargo could become even more difficult to enact, if Iranian and Venezuelan barrels remain off the market. Finally, there is the wider macroeconomic picture. Slowing global growth and recessionary fears all have the potential to lower demand for tankers and thus impact asset values and, whilst most major forecasting agencies still predict growth, consumer and business confidence continues to decline”, Gibson noted.
The shipbroker concluded that “ultimately, there is still the potential for further upside in tanker asset values; however, increasingly the downside risk is coming into focus. Owners can take comfort from a low orderbook and be encouraged by the reallocation of trade prompted by Russia’s invasion of Ukraine, yet how they balance this against the broader macroeconomic picture will ultimately depend on their appetite for risk”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
LNG and cryrogenic gas shipping tank designer GTT said the approvals in principle issued by DNV validate GTT’s technological advances in LH2 containment and the preliminary design of a LH2 carrier.
The French company said it has designed an LH2 containment system that both “meets current regulatory requirements and anticipates future developments”. Requirements and regulations governing the transport of hydrogen cargo are being developed within International Maritime Organization.
“Hydrogen, as an energy carrier and a fuel, is potentially one of the foundations of the energy transition. As such, it is essential that industry is able to pursue the enabling technologies safely and with confidence. An AiP can help build this confidence by demonstrating new solutions have been assessed based on long-standing, trusted and independent standards,” DNV vice president Johan Petter Tutturen said.
The DNV design approvals are part of a prior agreement with oil and gas supermajor Shell.
In February 2022, Shell announced a partnership with GTT around LH2 under which Shell is providing specialist knowledge to aid GTT in developing the liquid hydrogen carrier design and cargo tank design for a mid-sized LH2 carrier.
Shell said its participation in the project is part of a strategy to develop a broader hydrogen energy supply chain “by creating scalable and safe liquefied hydrogen shipping technologies”.
“Shell’s strategy is to become a net-zero carbon energy supplier by 2050 or sooner, in line with society, and we see that innovation with hydrogen and hydrogen technologies will play a major role in this ambition. Therefore, safe and efficient bulk transport of liquid hydrogen will be a critical enabler and we believe GTT will bring key expertise to this project that will ultimately help to accelerate and unlock this future energy source,” Shell general manager of technology, innovation and digitalisation Carl Henrickson said at the time.
In a mid-year report from the US Department of Energy’s (DOE) Energy Information Agency (EIA) said LNG exports increased by 12% in the first half of 2022, averaging 11.2bn cubic feet per day (Bcf/d), compared with second half of 2021.
They also broke down the total US LNG exports during the first five months of 2022, prior to the fire at a Freeport LNG facility in early June, which will be reducing export volumes for several months going forward. The EIA said that deliveries to the United Kingdom and European Union accounted 8.2 Bcf/d, amounting to 71% of total exports.
The EIA was estimating that the shutdown at Freeport LNG reduced US export capacity by an estimated 2.0 Bcf/d. During May, the Freeport facility loaded 20 vessels. For data on LNG vessel loadings, readers can find them at: https://www.energy.gov/fecm/articles/lng-monthly-2022
The growth in US at the present time was among many issues covered in a very thorough webinar presentation on LNG markets by Poten & Partners, which is active as a broker in the sector, but also offers extensive analytics on supply, demand and overall LNG market dynamics. Poten analyst Kristen Holmquist, explaining Poten’s longer term outlook (going out 10 years) said that major growth areas will be in Europe, Northeast Asia- especially China, and Southeast Asia.
Poten pegs the overall market for LNG shipments at 400 million tonnnes annually (mta) in 2022, with growth up to 550 mta in 2032. China alone is expected to account for nearly 40 mta of the incremental growth- as LNG is substituted for coal. India is expected to account for almost 25 mta of this increase. The US is likely to continue its front-runner status, with Poten saying that much of the new contracting for LNG sales, some with timeframes extending out 20+ years, is tied to US origins.
Over the next decade Poten sees the largest portion of supply growth coming from the US and Qatar with the two countries forecast to account for around 100 mta of 200 mta in supply growth between 2022 and 2032. Of this supply from the US would increase by around 60 mta and Qatar by around 42 mta tonnes year by 2032 with the US expected to overtake Qatar as the world’s largest supplier of LNG.
Holmquist, cautioned, “I think there could be some flexibility in that some US projects don’t get approved and more comes on in Qatar, but overall that’s about 100m tonnes of the 200m tonnes of increase in supply.”
Not surprisingly, estimates for European demand have been revised dramatically upward by events in Ukraine with European consumers scrambling to reduce their dependence on gas from Russia. Poten’s forecasters have increased their views of European imports from around 85 mta in the mid/ late 2020’s up to 110 mta, with some 18 mta – more than half of this growth, tied to consumption in Germany, predominantly, and Poland. This is set to drive demand for FSRUs read more here
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