Since the collapse of the USSR in 1991, ports in the Baltic have grown in their importance for crude and oil product exports. However, since 1998, the sectors of the shipping market that service them have undergone a radical transformation.
Out from the Shadows
A number of crucial developments changed the Baltic from a key market for Handy and Panamax tankers to one dominated by the Aframax sector. As demonstrated by the Graph of the Month, exports of both crude and oil products increased by 118% between 1998 and 2001. Owing to the limited port infrastructure in the Baltic at that time, the surge in available cargoes benefitted vessels that were able to operate in the existing ports, such as Ventspils. Furthermore, much of the increase in exports was made up of clean and dirty product cargoes, notably fuel oil, which are estimated to have increased by 37% and 174% respectively in the period, favouring smaller ships. As a result, the share of trade controlled by Handies increased from 23% in 1998 to 33% in 2001.
Shaken and Stirred
However, the opening of the Russian crude oil terminal at Primorsk changed the nature of shipping in the region. Its size and facilities allowed larger tankers, such as Aframaxes, to trade larger cargoes and at a greater frequency. Primorsk is a terminus for the Baltic Pipeline System (BPS), which transports 1.5m bpd, causing exports ex-Baltic to increase by 158% between 2001 and 2006. Crude exports ex-Baltic increased by an estimated 167% in the same period, mostly from Primorsk, leading it to eclipse the smaller Baltic ports. This increase was overwhelmingly served by Aframaxes, which resulted in their share of trade going up from 40% in 2001 to 70% in 2006.
End of the Beginning
After 2001, upsizing became entrenched. Global oil demand grew by 5.0% between 2004 and 2007, leading to a surge in available cargoes from key exporter regions, including the Baltic. Consequently, crude became an ever larger part of the growing Baltic exports, leading Aframaxes to take a greater share of overall Baltic trade. Despite the onset of the recession at the end of 2007, the Aframax share of trade volumes actually increased to 78% of total trade ex-Baltic in 2010. Thus the upsizing trend that began in 2001 continued into the recession, as charterers looked to cut costs through economies of scale. The dominance of Aframax vessels was further boosted in 2012, when the port of Ust Luga in Russia was opened. Like Primorsk, the port operates as a terminus for part of the BPS, and led to crude oil exports ex-Baltic increasing by an estimated 20% between 2011 and 2012 (y-t-d), a trend that is likely to continue as Ust Luga develops.
Currently, Aframaxes dominate the Baltic dirty and crude markets (70% and 85% market share respectively), while Handies predominate in the clean market (61%). With crude oil being diverted from Russian-EU landborne pipelines to the Baltic, any further increases in available crude cargoes from Ust Luga would be a welcome positive development for the Aframax sector, particularly as it struggles to compete in its more traditional markets elsewhere.
Source: Clarksons
