Tanker Trades: Which Way is Up?
Many tanker market participants are aware of the extensive size of the orderbook scheduled to deliver in the coming few years. Such a vast supply of tonnage traditionally has had a negative effect on tanker freight rates, unless demand for tonnage was large enough to compensate. In January of every year we measure that demand and use our findings for producing our yearly Tanker Market Outlook publication. Our calculations show that global marine transportation demand on a tonmile basis in 2007 for crude oil and petroleum products across the five tanker sectors (excluding MR dirty demand) grew about 1.2% over 2006 levels. This compares to year-on-year growth for the period 2005-2006 of about 6%. We measure demand in terms of the total ton miles recorded in each vessel class over the actual trade routes performed during the year. In this way, greater utility is derived from examining demand changes on a sector-by-sector basis rather than from an overall fleet perspective. The VLCC sector's demand remains highly consolidated with seven trades comprising 86% of total demand. Four of these trades originate in the Middle East and account for 70% of total demand. Seventy percent of demand in this sector is for eastbound cargoes loaded in the Arab Gulf while 30% is taken up by westbound cargoes ex-AG. Overall demand for VLCC tankers was essentially unchanged in 2007 from levels observed in 2006. Trade from the Middle East to the U.S. West Coast fell by 13% year-on-year representing about 10 VLCC cargoes or approximately 55,000 barrels per day. Each dirty sector draws its own demand picture quite different from the others. The Aframax sector is more consolidated than the Suezmax sector, while the Panamax sector is less consolidated than its Aframax counterpart. On the other hand, demand for clean product transport increased a little over 2% from 2006 levels. In comparison, clean transport demand grew 3.5 percent in 2006. The average annual compounded growth rate for clean products transport since 1998 has been 6.6%. Clean demand remains moderately consolidated with 10 trades comprising 81% of total demand. The trans-Atlantic trade destined for US and Canada was 15% of total demand in 2007. The biggest change in 2007 was recorded on Far East - South East Asia / Americas trade recording 44% year-on-year growth; while the biggest decrease (10% year-on-year) was recorded in the
February 2008
Americas regional trades. We expect seaborne transport demand to increase by 2.4% in 2008 over 2007 figures for crude and dirty products. The overall clean demand projection shows a 4.9% yearly on-year growth in 2008. The tanker demand outlook has mod-
erated from a year ago and a large newbuilding orderbook will add significant number of vessels to the trading fleet over the next few years, especially 2009. An unexpected surge in conversion projects since the beginning of 2007 will help mitigate the pressure on rates
caused by these factors. A full discussion of the outlook for the five major tanker sectors from 2008 through 2012 will be available in our Tanker Market Outlook at the end of January. (Source: McQuilling Services, LLC)
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