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Very weak market, uncertain/weak fundamentals Oversupply of tankers, mainly hidden

Tanker Market Overview by Erik.Ranheim@INTERTANKO.com Senior Manager Research and Projects Oslo 18 October 2011. The state of the Tanker Industry . Very weak market, uncertain/weak fundamentals Oversupply of tankers, mainly hidden slow steaming (ballast) Lowering of C/P speed, why 14 knots?

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Very weak market, uncertain/weak fundamentals Oversupply of tankers, mainly hidden

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  1. Tanker Market OverviewbyErik.Ranheim@INTERTANKO.comSenior Manager Research and ProjectsOslo 18 October 2011

  2. The state of the Tanker Industry • Very weak market, uncertain/weak fundamentals • Oversupply of tankers, mainly hidden • slow steaming (ballast) • Lowering of C/P speed, why 14 knots? • Suez Canal less used • Piracy effect – longer routes/inefficiency • Waiting • Increased Middle East export has not helped freight rates • High oil price despite weakening fundamentals

  3. Tanker MarketWorld GDP and oil demand change $/day Rates improved by slow steaming/backhauls Source: Baltice: Exchange/BITR

  4. Comparative Earnings 2011 Jan-Oct, 280,000 cargo ts $/day Rates improved by slow steaming/backhauls Source: Poten & Partners

  5. Tanker MarketVLCC newbuilding prices and break even rates m $ $/day

  6. Tanker Demand

  7. Tanker MarketWorld GDP and oil demand change % Oil/tanker demand correlates with Economic growth IMF forecast positive growth – but there is great uncertainty Because the extra barrel is taken from the Middle east, tonne-miles growth is stronger Source. IMF/BP/IEA/Fearnleys

  8. Tanker MarketOil price and freight rates 1970-2011 $ per barrel

  9. Middle East oil production mbd Year

  10. Monthly VLCC fixtures by l aycan number 2011 is a projection based on 9 months Source: MST Geneva

  11. Tanker DemandIncrease in world oil demand mbd Based on data from IEA

  12. Reported VLCC Fixtures by Charterer ‐ 2009 ‐ 2011E Number +15.9% +9.8% Source: Poten & Partners

  13. Tanker DemandOil balance: production - consumption mbd Source: INTERTANKO / IEA

  14. Tanker DemandSeaborne Oil Trade and Middle East Oil production mbd 000 bn tonne-miles Based on Fearnleys/IEA

  15. Tanker DemandMiddle East Oil production Jan-2000 to Aug-2011 Mid Oct. 2011negative VLCC Rates mbd Based on Fearnleys/IEA

  16. Tanker Supply

  17. Tanker SupplyTanker fleet development m dwt number Assumed orderbook August 2011, include chemical tankers Tanker fleet increase 2003-2013 some 72%

  18. Average age tanker fleet above 10,000 dwt Years Based on LRFairplay

  19. Tanker SupplyTanker phase out, deliveries, scrapping tankers 10,000 dwt+ balance assuming various demand increases m dwt Under above assumptions, 6% growth necessary to regain market balance by 2014 or more removal of DH tankers

  20. Suezmax phase out, deliveries, scrapping m dwt

  21. Tanker Values

  22. VLCC value - 15 years old and scrap value m $ Source: Clarkson/SIW

  23. Conclusion

  24. ConclusionsOil demand, tonne-mile, and tanker fleet indices Source: IEA, Fearnleys, INTERTANKO

  25. ConclusionsSlowing Growth, Rising Risks • Fundamentals uncertain, weakening • Political risk and debt problems are aggravating - lack of political leadership threatens recovery in the US and Europe • Chinese growth is threatened partly by weakening world economy but also by a domestic debt burdened industry as well as social unrest • Surplus of tankers will continue to increase

  26. Strategic tanker consideration • Tankers at the bottom of a cycle • Currently high oil prices despite weakening demand • Long term high oil prices will dampen growth in world economy and a stimuli to fuel saving and to switch to other sources of energy • Substantial opportunities for both owners and charterers with regard to vessel speed • Costs reduction needs carful risk management

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