BIMCO forecasts freight rates to face pressure after the end of the high seasonal demand in Q4, as well as the boost from the sulphur cap. The fleet growth of 6.3% in the crude oil tanker market and the 4.8% growth in the oil product fleet will also affect the supply and demand balance.
As Peter Sand, Chief Shipping Analyst at BIMCO, said, VLCC earnings reached USD 307,888 per day on 11 October, despite the fact that the following week they fell. After the drop, rates stood at USD 74,681 per day on 1 November which is the highest level since early 2016.
On a geopolitical level, tighter US sanctions on certain oil tankers and shipping companies, along with tension in the Persian Gulf and Red Sea, had a significant impact on the market.
However, in spite of these factors, the fundamentals of the market remain unchanged, so the peak freight rates were unsustainable.
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While reported earnings were over USD 300,000 per day, anecdotal evidence indicates that all contracts higher than USD 200,000 per day quickly fell through, when it was understood that the spike was temporary.
Anticipating a strong demand boost from the IMO 2020 Sulphur Cap, shipowners have pushed up fleet growth higher than needed, BIMCO explains.
Specifically, the oil product tanker fleet has sharply risen in deliveries from 2018. This means that BIMCO expects fleet growth of 4.8% in 2019, in comparison to 1.8% in 2018. Deliveries so far this year have surpassed those for the whole of 2018 by 2.2 million dead weight tonnes (DWT). BIMCO now forecasts an additional 0.6m DWT to be delivered before the end of the year.
The majority of the additional capacity comes from deliveries of Medium Range (MR) tankers. These average 48,549 DWT in size, bringing a further 4.1m DWT into the fleet in the form of 85 ships. Most of the remaining delivered capacity comes from 24 new LR2 tankers, totalling to 2.6m DWT.
As for the crude oil fleet, it is expected to experience the highest growth of all of the main shipping fleets with a growth of 6.3% in 2019. Overall, 27.5 million DWT of crude oil tanker capacity has been added to the market since the start of 2019.
BIMCO is currently forecasting that the crude oil tanker fleet will grow by around 1.5% in 2020, a marked slowdown from this year. Delivery of new tonnage is expected to be 50% lower in 2020 compared with 2019, with 15m DWT currently expected to arrive on the water; demolition activity is also set to rise. The joint effect will mean a slowing of fleet growth.
BIMCO concludes.
