After a challenging year, low demand looks set to damage the market in the coming months combined with too many ships fighting for too few cargoes in both the crude oil and oil product segments, says BIMCO.
As BIMCO explains, the record-breaking Q2 2020 is a distant memory and, the market now faces a slow recovery with low demand, stock drawdowns in consuming countries and loss-making rates.
As for cargo demand, oil products were hit in different ways by the crisis. While some are recovering, others have yet to see any meaningful upturn. Namely, total EU seaborne imports of oil products ended 2020 down by 19.6%, with fuel oil performing the worst, plummeting 53.8% year on year. On the other hand, gasoline imports rose 5.1% to 17.4m tonnes.
Moreover, at 2.5%, the oil product tanker fleet growth expected by BIMCO is on par with the 2.4% increase in the market experienced in 2020. Crude oil tanker fleet growth is expected to fallfrom 3.3% in 2020 to 1.5% in 2021, closing in on its low point of 0.9% advance in 2018.
So far this year, 26 crude oil tankers have been delivered, totalling 3.7m dead weight tonnes (DWT), along with 16 oil product tankers with an overall capacity of 1.1m DWT. Over the year, BIMCO expects oil product tanker deliveries to reach 5.7m DWT, and crude oil tanker completions to fall from 18.7m DWT last year to 14.2m DWT this year.
Since the start of the year, the orderbook for both crude oil and oil product tanker ships has fallen, as less new tankers have been ordered (2.5m DWT) than have been delivered.
The poor market conditions are also starting to be reflected in tanker demolition activity. COSCO singled itself out in January by announcing that it was scrapping five VLCCs, three Suezmaxes, one Panamax and a Handysize tanker, BIMCO informs.
Over the year, BIMCO expects crude oil tanker demolitions to increase to about 7m DWT. Oil product tanker demolition, on the other hand, is expected to rise from 1m DWT in 2020 to 1.3m DWT in 2021.
In comparison to a straight-line depreciation over 20 years, current VLCC values are between 10% and 20% lower, with a five-year-old VLCC closest to its straight depreciation value, and a 10-year-old ship the furthest away.
The slow recovery in global oil demand means many months of hardship ahead for tanker shipping, with too many ships fighting for too few cargoes – unless something unexpected once again rattles the market