Friday, 4th November 2011

Top of the Crops

Last month our weekly issue looked at the prospects for the grain trade in the forthcoming year. While the overall potential for growth in ton-mile demand of grain exports looks limited soybean consumption may present some robust growth prospects. The soybean trade between the Americas and China may be boosted and require more vessels if guidelines set by the Federation of Oils, Seeds and Fats Associations (FOSFA) are adhered to.

Friday, 4th November 2011

Port costs up almost 3%

Yesterday Worldscale published 2012 flat rates for the main BITRA routes. This follows the release on October 5 of the WS bunker price (up 30% on 2011 to $606.56/tonne) used to calculate $/tonne costs on each route. Port costs for Worldscale’s model 75k dwt tanker rose by 2.93% on average, compared to 7.53% last year and a five year average inflation of 7.32%. This compares to 4.37% average port cost inflation during 2010/11 in the ports assessed by the Baltic Exchange for all BITRA routes.

Friday, 28th October 2011

Mid East Refinery Plans: A Recap

Saudi Arabia - the world’s largest producer of crude oil and the only country with significant spare capacity to swing crude prices has long been planning a dramatic expansion of its products production capacity.

Friday, 28th October 2011

A Cast Iron Salvation?

The orderbook now stands at 81.9 mn Dwt for bulkers of 100 k Dwt and above, representing 36% of the existing fleet, to be delivered over the next 4 years. Can new iron ore mines coming on stream and existing mines ramping up production fill this increase in capacity?

Friday, 21st October 2011

Panamax: check for pulse

It has been an unspectacular year for the Atlantic-trading Panamax. Rates started the year on a
downward slide following a minor rally at the end of 2010. Since then, notwithstanding a minor
recovery in spring, they appear to have lost the will to live. But not, it would appear, for want of
demand.

Friday, 21st October 2011

What does the grain trade look like for next year?

World grain trade is expected to be 2.4% higher in the 2011/12 harvest than a year earlier according to a report published last week by the United States Department of Agriculture (USDA). This is due to recent good weather conditions in major exporters and the lifting of the Russian export ban in July. Could this lift the Panamax and Supramax markets?

Friday, 14th October 2011

MRs: turning the corner?

The forward curve places TC2 at around $10,000 daily in 2012. That’s slightly up on the past two years and comfortably higher than 2009, but in our view it is still pessimistic. We would highlight 5 reasons why we believe MRs will perform better next year than this barometer for the market in 2012 suggests.

Friday, 14th October 2011

Rates On The Up

The upward trend in the dry market since mid-August continues thanks to healthy demand for raw materials. Capes have led the rally, up 184% compared to an increase of 36% for Panamax, 26% for Supras and 26% for Handies. However, average year to date earnings across all drybulk segments are still lower than last year.

Friday, 7th October 2011

Dry Vs Wet

Dry bulk is bad, but not nearly as bad as tankers. This was a theme that reoccurred during a rather downbeat panel discussion of the dry bulk market yesterday. Odd then that the preceding panel ACM ran on the tanker sector was altogether more upbeat. Are dry owners just less optimistic by nature?

Friday, 7th October 2011

Dry Vs Wet

Read more…

Friday, 30th September 2011

Gone but not forgotten

Our fleet numbers aim to establish the size and future growth of capacity available to service
international spot trades for mineral oils. But when we drop capacity from the spot fleet, what
does it actually go on to do? And when it stops doing what it goes on to do, are we forgetting
that it may need to be replaced?

Friday, 30th September 2011

Vale Sees Strong Iron Ore Demand Outlook

Vale, the world’s largest iron ore producer, is confident about the fundamentals of the iron ore market. In spite of jitters in the world economy, China’s steel production is expected to remain robust. This outlook would appear to be supported by an influential bank’s recent forecast for iron ore prices; they will remain strong into 2013 on lagging supply and strong demand.

Friday, 23rd September 2011

What Now for Atlantic Basin Products?

Oil refining and oil shipping have more in common than just the commodity that flows through their
pipes. Both industries are highly capital-intensive, built to best-guess demand a long-way into the
future. Since 2008, both have become victims of acute (and probably chronic) overcapacity. Both are
considering moth-balling capacity, switching to long-term oil storage, or selling for scrap value.

Friday, 23rd September 2011

Japan's Lost Reactors and Shipping Demand

At a recent press conference Japan’s former Prime Minister, Mr Kan said that “Japan should aim for a society that does not depend on nuclear power generation” and the current PM Mr Noda agrees. In August, Japan’s nuclear power capacity factor (utilization) fell to 26.4% compared to 70.2% in August 2010 the Federation of Electric Power Companies announced last week, the lowest figure since data collection started in April 1977. As we would expect energy has had to come from other sources to replace the lost nuclear generation. The main contenders are coal, LNG and oil.

Friday, 16th September 2011

Opposing Indicators

The US is importing the smallest amount of crude from the AG in fourteen years-Saudi Arabia is producing the highest amount of crude in thirty years-Benchmark TD1 and TD3 VLCC rates are US $-12,943 and US $-2,720 /day respectively. This begs the question, what’s going on??

Friday, 16th September 2011

What has happened to the fleet in 2011?

How have the fleet and the orderbook changed since the start of 2011? Year to date the dry bulk market
has had a net fleet growth of 8% and what has delivered so far has fallen behind what was scheduled to
deliver at the start of this year.

Friday, 9th September 2011

Cape rates and iron ore exports

Approximately 76% of the iron ore trade is done on capesize vessels. So why have cape rates not kept up with the rising volumes of iron ore being shipped?

Friday, 9th September 2011

Autumn VLCC recovery?

If a recovery is coming, it will start in autumn. You could argue - at a stretch - that 7 out of the past 8
years have seen a relatively weak summer lift into a late q3/early q4 rally. The only exception was 2006, where the rally started earlier than usual (late spring). Is it too much to hope in this parlous market that we will see it happen again in 2011?

Friday, 2nd September 2011

Nigerian product demand: wherefore art thou?

Blame for the drop in Atlantic trading MR rates since April has been placed by many commentators squarely on the shoulders of a driverless US driving season. Some of the more observant have pointed out that strong European demand for US gasoil has changed the Europe to US gasoline run (TC2) into a discounted repositioning leg. But few appear to have recognized the damage caused by the loss of West African gasoline demand.

Friday, 2nd September 2011

Cape Momentum

More transatlantic coal cargoes, more iron ore into China, increased congestion and the unwillingness of owners to venture on the loss-making backhaul have all helped capesize rates maintain their upward momentum.

Friday, 26th August 2011

Freight Seasonality

The dry bulk market has ticked up as it does almost every August, this time helped by factors beyond seasonality. Capesize rates lifted the dry bulk market this week and the typically stronger autumn and winter months are just around the corner. Seasonality may once again provide Panamax owners a ray of hope as the northern hemisphere increases its consumption of coal for electricity generation and the US grain export season peaks.

Friday, 26th August 2011

WS volatility to flatten in 2012

Without a change in the supply / demand balance for tankers, WS volatility will be considerably lower
next year than it has been in 2011. This is not a gloomy outlook – merely a statement of fact.

Friday, 19th August 2011

Newbuilding Price vs. Cash Flow

If the last 3 years of spot rates were the only basis on which the merits of investing in bulkers were judged, you would not be buying a newbuilding today.

Friday, 19th August 2011

How big the drop in tanker prices?

Investing in tankers should (one would hope) involve an element of cash flow analysis -
weighing historical and future earnings against prevailing asset values. Taking the three year
time charter rate as an indicator of future earnings, and the last three years of spot rates as a
gauge of historical earnings, assets still look overvalued.

Friday, 12th August 2011

Paying more for a cheaper ship

Why don't oil companies offer to pay more to charter in ships that will cost them less to run? We have
often wondered why a vessel's bunker consumption does not feature more strongly in the vessel
selection process. But after several years of higher bunker prices, it seems that oil companies are finally
starting take the issue seriously.

Friday, 12th August 2011

Europe looks West for Coal

In the first five months of this year Europe has imported much more thermal coal from the United States and Colombia. Imports from the US have almost tripled and imports from Colombia are up 15%. Lower freight costs and cheaper thermal coal makes these two countries an attractive alternative to importing thermal coal from South Africa.

Friday, 5th August 2011

We were wrong on U.S. oil import growth

At the start of this year we argued that the U.S. was likely to be a driving force in seaborne oil trade
growth in 2011. This admittedly ‘bullish’ case expected the U.S. economy to recover strongly while net
local oil supply growth in the U.S. and Mexico would falter, forcing the U.S. to raise long-haul imports.
Unless our current view turns out to be equally misguided, it looks like we were out on both counts.

Friday, 5th August 2011

Where next for newbuilding prices?

The newbuilding order book remains worryingly large, freight rates are showing no signs of recovery and yet prices for newbuild orders look pretty 'sticky'. It is the rising cost of inputs that has prevented them from falling further.

Friday, 29th July 2011

Market Comment

Current global macroeconomics are shaky at best with all eyes on the U.S. and European debt concerns, Chinese growth momentum and high fuel costs, amongst others. The near future looks very testing, however, the longer term outlook does show promise with positive signs such as inreased iron ore production and robust demand from BRIC countries.

Thursday, 28th July 2011

Iran halts exports to India; tonne-miles ahoy?

Fed up with India’s failure to find a way round US sanctions to pay for its crude, Iran has halted
its 400k b/d crude oil shipments to India. Though we aren’t expecting to see a sudden rush to
replace lost barrels from further afield, India will certainly accelerate its hunt for new sources of
crude oil supply. This bodes well for tonne-mile demand.

Friday, 22nd July 2011

Greener Ships

On Friday, July 15th the IMO made energy efficiency targets mandatory for newbuildings. What are they and when do they take effect?

Friday, 15th July 2011

Concentrate on Consolidate

What is the historical market concentration of controllers in each tanker sector?

Friday, 15th July 2011

Liquefaction of Cargoes

Negligence and irresponsibility often have dire consequences for people, cargo and vessels and it is the duty of the shipping community to flag issues that are of gobal concern. One such concern is cargoes that may liquefy (eg mineral ores), becoming a muddy-like sludge, while on board and may cause a bulk carrier to capsize or even sink as a result of the liquid movement in the holds.

Friday, 8th July 2011

Flat Rates

With only three months left to go before the worldscale bunker price that feeds the 2012 flat rates is fixed, we should have a good idea of what they will look like. We currently use an adjusted bunker forward curve to ‘predict’ the unpublished 2012 worldscale bunkers. The 2012 WS bunkers are set to rise by a further 36% over this year; this would be following a similar rise of 2011 (37%). Although the fluctuation of the previous year’s appears to have settled, bunkers have now begun to trend up strongly, thereby helping increase estimated future $/ton flat rates.

Friday, 8th July 2011

Market Report

Read more…

Friday, 1st July 2011

Have we overstated the 2011 orderbook?

The limited number of tankers delivered in the first half of this year suggests that ‘slippage’ will claim
many more 2011 deliveries than we had originally thought.

Friday, 1st July 2011

Coal Dynamix

Additional coal has continued to come onto the market, with demand emanating from China, India and Europe. This has boosted capesize rates including the two main coal routes on the Baltic Capesize Index.

Friday, 24th June 2011

Very Large Ore Carriers

Vale's 400,000 dwt 'Vale Brasil' is now the largest bulk carrier in existence destined to transport iron ore from Brasil to China. But its recent re-routing to Italy has raised some questions over the short-term viability of Vale's strategy.

Friday, 24th June 2011

60m barrels that won’t be shipped

Yesterday the IEA announced the release of up to 60 million barrels of oil from the strategic
petroleum reserves (SPR) of OECD member states. The drawdown will take place over the next
30 days. Half of that volume will come from the US, 30% from Europe and 20% from OECD Asia
where it will be consumed. What impact will this have on tanker markets?

Friday, 17th June 2011

What if the IEA has got it right?

Yesterday the IEA released its latest medium‐term outlook for oil and gas markets. While we
haven’t traditionally paid much attention to the projections it makes each year for the growth
in crude oil trade, this time we got to wondering what they could mean for freight.

Friday, 17th June 2011

To Scrap or Not To Scrap...That is The Question!

A combination of factors may urge Owners to dispose of their vessels - an expensive upcoming special survey, the level of scrap values, second-hand prices and current trading conditions. How many more vessels do we see joining the 3 VLOC's, 40 capes, 7 mini capes, 2 post-panamax's, 41 panamax's, and 78 handysizes scrapped so far this year?

Friday, 10th June 2011

OPEC production creeps up

The call on OPEC crude will rise by 1.6m b/d in the second half of this year, according to OPEC’s own
numbers. Thanks to this week’s ‘non‐agreement’ on OPEC’s output quotas, Saudi Arabia is now free to open its taps as it sees fit. But will it open them enough to soak up the oversupply in the crude tanker market?

Friday, 10th June 2011

Out with the old and in with the new

Will the increasing tonnage we are seeing beached on the shores of the sub-continent allow for some breathing room?

Friday, 3rd June 2011

Product tankers: room to grow?

If no further orders are placed we believe the tanker fleet >25k dwt will grow by 4% this year, 5% next year and 2% in 2013. Almost all of that growth will feed into crude/dpp tanker trades.

Friday, 3rd June 2011

Unpredictable Changes

Do we see a little sunlight on the horizon this week?

Friday, 27th May 2011

A fourth to be reckoned with

The fourth special survey, falling on or around a tanker’s twentieth anniversary, is expensive. As such it presents a good opportunity for owners of older units to take stock of the prospects for asset values and freight markets over the five extra years’ of trading life that the survey will buy. With sentiment at rock bottom, we believe most tanker owners – probably representing more than three‐quarters of the
vessels in question ‐ will not spend the money.

Friday, 27th May 2011

The Canadian iron ore rush – update

Canada has vast iron ore resources and the new mining projects that are underway will likely boost future production and exports.

Monday, 23rd May 2011

GFI Container Report 20 May 2011

Recently, the World Shipping Council (WSC) made an attempt to inflate the container market by warning shippers of container shortages during the 2011 peak shipping season. Today, we would like to analyse the market for containers and make an educated guess about the validity of the arguments made by the WSC.

Friday, 20th May 2011

Discipline in the ranks

We can only guess what will be scrapped or otherwise leave the international trading fleets (or
their orderbooks) in coming years. But if owners consistently order more capacity than they
remove then it is reasonable to assume they believe demand for their ships will grow. With
inflation worries now putting pressure on global commodity demand it is worth checking where
that relationship stands.

Friday, 20th May 2011

DRI or Not...

Transportation of DRI presents something of a double-edged sword to shipping; on the one hand this cargo can be very lucrative for an owner and on the other it could potentially pose a risk to the vessel that is carrying it if precautions are overlooked.

Friday, 13th May 2011

Friday 13th!

Friday, 13th May 2011

Technical Indicators

In the longer run, markets driven by fundamentals. However, short term movements can be due to a
number of reasons, for instance herd mentality, sentiment and market efficiency. Through technical
analysis we will seek to capture the direction of these movements.

Friday, 6th May 2011

Oil price falls – so what?

This week has seen one of the biggest commodity market sell offs in two years. From over $125/bbl at
the end of April, Brent fell 8.6% on Thursday and another 5.8% to below $106/bbl before recovering to
above $110/bbl by mid afternoon. Is this the beginning of a sustained fall or is it just a sizeable
correction, and should the answer bother us?

Friday, 6th May 2011

Powering India

Thursday, 28th April 2011

Market report

Read more…

Thursday, 21st April 2011

How high can you go?

“Economic impacts from high oil prices are never instantaneous, and often take months to materialise, but preliminary data for early 2011 already show signs of oil demand slow‐down” the IEA states in its latest oil market report. Demand slow down, maybe. But what evidence is there to conclude that high oil prices are to blame?

Thursday, 21st April 2011

An act of piracy

A conference on piracy, attended by representatives of more than 50 countries, took place this week in
Dubai, to consider the widespread threat of piracy and public and private initiatives to counter the
increasing risk. The International Maritime Bureau (IMB) reported last week that there were 142 attacks in the first quarter, the highest ever.

Friday, 15th April 2011

Europe can absorb more MRs

For all the talk of negative oil demand growth and refinery closures, MRs trading in and around Europe
seem to be finding plenty to do. Not yet enough to offset fleet growth in the sector perhaps, but with
fleet growth tailing off this year and next, it will come.

Friday, 15th April 2011

Vale's return to the future

Friday, 8th April 2011

Developments in India

India is the world’s fifth largest steel producer with 67 Mt produced in 2010 and the world’s third largest iron ore exporter with exports of 98Mt in 2009 after Australia’s 363Mt and Brazil’s 266Mt. With almost complete self sufficiency in iron ore supplies, India still needs to import high quality coking coal to feed its fast-growing steel industry forecasted to expand to 130 Mt by 2015-2016.

Friday, 8th April 2011

Market report

World events continue unabated, but seemingly have little effect on the shipping market.

Friday, 1st April 2011

China v The Big Three

China is fighting its reliance on iron ore imports from the big three – Rio Tinto, Vale and BHP Billiton – and aims to break it by 2015. How much more will China be able to produce by ramping up domestic iron ore production and acquiring rights to overseas sources?

Friday, 1st April 2011

Turmoil and Tonne‐Miles

Bunker prices approaching the highs of July 08; pirates adding significantly to the cost of shipping oil
from the Middle East; 1.6m b/d of Libyan production offline – probably for a while; demand for
some grades of crude and fuel oil jumping as demand from Japanese oil‐fired power stations kicks
in; near record import demand from China; US Gulf of Mexico production stagnating; uncertainty
over new regimes in Egypt and Tunisia, the control of Yemen up for grabs, street protests in
Bahrain, Oman and Saudi Arabia. With all this going on, shouldn’t the VLCC market be a little
stronger?

Friday, 25th March 2011

U.S. Coal - A Brief Overview

The United States has more than one-fifth of the World's reserves of coal with 56% more than the country (Russia) with the second largest reserves.

Friday, 25th March 2011

Expensive, endangered pirates

Of all the options available to the beleaguered shipowner moving cargoes through pirate‐infested waters, armed guards so far appear to be the most effective way of warding off an attack. But like other pirate‐evasion tactics, armed guards don’t come cheap. Worse still, few charterers want to be associated with them. So in a poor freight market what is the shipowner to do?

Friday, 18th March 2011

Another Disaster

What does Japan’s earthquake mean for its energy-generation and steel production sectors and what are the possible consequences on shipping markets?

Friday, 18th March 2011

Japan – how does it affect tankers?

Here is a brief run‐down of what we have learnt about the impact of Japan’s March 11 quake on oil and
wet freight markets.

Friday, 11th March 2011

Japan's Earthquake

It is clear that this morning's 'superquake' off the North East coast of Japan will come at a significant cost to human life. Our thoughts and prayers go out to all those affected by the tragedy.

Judging from the confused movement of TD3 and TC5 futures (TD3 trading down for April then returning to where it started, and TC5 doing the reverse) no consistent view has emerged as to how this will affect the freight markets.

Friday, 11th March 2011

Cyclists Beware

Commodity price boom: 'super-cycle' or secular trend?

Friday, 4th March 2011

The Silver Lining?

The Saudi government has assured the world that it would be able to offset any cut in Libyan production.But with other countries looking increasingly unstable, how much more can Saudi Arabia produce?

Friday, 4th March 2011

Scrap and Build

What comes in must go out. Or does it?

Friday, 25th February 2011

Is it possible to project demand for MRs?

If satellite and AIS vessel tracking could give us a complete movement history of every MR (which it
can’t) and if we could somehow establish how much cargo MRs could move in a completely efficient
trading environment with minimal ballasting – then it should be possible to work out the utilisation of
the MR fleet. Could that help us project MR freight rates? And if not, what can?

Friday, 25th February 2011

A look into the abyss

Friday, 18th February 2011

My, you look so young!

With (almost) all the single hulls gone from international oil and products trades, what can we say about
future removal of older double hull tankers from the spot fleet?

Friday, 18th February 2011

What a scrap

Low freight rates, high bunker prices and a large newbuilding orderbook has led to a number of vessels going for scrap. However, aided by the anticipation of Bangladesh's reopening, firm steel prices and owners continuing to trade fully amortised ships, scrap prices have remained buoyant. But for how much longer?

Friday, 11th February 2011

How low can we get?

Bunker prices continue to make up an ever increasing proportion of freight rates and it is becoming less and less economical for owners to continue trading.
An important point to note in our report this week is the subdivision of capesize vessels into VLOC (>224,000dwt) and capesize (129-224,000dwt) to emphasize the importance of VLOCs as a component of the total cape fleet.

Friday, 11th February 2011

The West’s oil: by land or by sea?

We’ve touched on this before but it’s important. If oil demand growth in the US and Europe is fed by
pipeline crude, then the crude tanker market is doomed. If on the other hand it is fed by Middle Eastern
crude, it stands a chance of pulling out of this rut by the end of the year. So what do this week’s oil
production forecasts* by the EIA and IEA tell us about our future?

Friday, 4th February 2011

Grains of Sand

With the political consequences of high food prices in sharp focus, administrations in the world’s poorer countries are throwing money at the problem.

Friday, 4th February 2011

Piracy: the problem grows

The latest statistics on piracy in the Indian Ocean make for sober reading.

Friday, 28th January 2011

USA back in driving seat?

Could the US switch places with China as the driver of tonne mile tanker demand this year?

Friday, 28th January 2011

New Perspectives

Higher tonnage supply and lower cargo availability have caused freight rates to tumble. Combined with recent global weather phenomena we are also witnessing a dramatic change in the relationship between freight rates of different size vessels.

Friday, 21st January 2011

Commodity Prices and Shipping Shares

A review of the year that has just passed shows a mixed year for the dry bulk sector. The transportation sector and commodity prices have performed extremely well with iron ore and agricultural products leading the way. Performance of shipping companies’ stock has shown a mixed picture, with some doing exceptionally well and others still lagging behind.  

Friday, 21st January 2011

A glass half full

Wouldn’t it be dull if we all agreed on everything? At a conference this week we laid out what we feel is a credible case for the crude tanker market returning to balance by the end of this year. At the same
conference, another well respected commentator explained how in his view the VLCC market would be 30 to 40% oversupplied by the end of the year. He was expecting to wait three or four years for the market to pick up. Of course both outcomes are quite possible.

Friday, 14th January 2011

The weather is always with us

Extreme weather conditions continue. Snowfall in New Oreans, floods in Brazil and Australia and the seasonal La Niña phenomenon are all having an effect on the operation of ports and the transportation of cargo.

Friday, 14th January 2011

Non-Opec Fights Back

Oil discoveries since the 1990s have undisputedly favoured the bigger ships. But the last six
years have provided some encouragement for the downtrodden Aframax sector. This weeks’
discovery of 4.2bn bbls in the Levant basin off the coast of Israel should provide another lift to
the short-haul market.

Friday, 7th January 2011

Rates and flat rates

Welcome all to 2011; and welcome back to the time‐worn question of how much we need to adjust our
WS rates to accommodate the new flat rates for routes that have yet to trade. To avoid going through this process once again next year, here's how it should, and shouldn't, be done.

Friday, 7th January 2011

A Major Force

Amidst all the partying and merrymaking during the Christmas and New Year period, some parts of the World were not so amused by the abnormal weather conditions they experienced.... or by the impact the weather is having - and will continue to have - on the shipping industry.

Friday, 24th December 2010

The Bosphorus Conundrum

Depending on the timing of new pipelines expected in the region, projected increases in oil production
from the Caspian over the next decade may outstrip Bosphorus capacity. It is expected Caspian region production will peak at 5.6mbpd in 2025 from 2.9mbpd today.

Friday, 17th December 2010

The Highs and Lows of 2010

The Market: For crude carriers this year’s market has been a game of two halves. Rates started the year with a surge and stayed reasonably strong and very volatile until July. Thereafter the market tumbled and showed little sign of life until staging a minor rebound in November.

Friday, 17th December 2010

Copper bottomed and copper fastened

Many expressions in the English language have nautical origins and, since this is our last issue in 2010
and we’re feeling happy as we near the Christmas holidays, we thought we might take the opportunity
to explain some of the more interesting phrases. To ‘splice the mainbrace’ was originally an order to
effect one of the more difficult repair jobs aboard a sailing ship; it now refers to the order given abord to
issue the crew with a celebratory drink.

Friday, 10th December 2010

Are we owed a Q1 rate spike?

It was fun while it lasted but the Q4 spike was too little too late. Earnings for this quarter look likely to
outperform a dreadful third quarter but with Q4 unlikely to average much over $16,000 /day, that’s
little consolation. So having been denied our 4th quarter spike, does this make rates more likely to
bounce in Q1 next year?

Friday, 10th December 2010

Every picture tells a story

From previous levels of approximately 20 million dwt per year, deliveries will exceed 90 million dwt this year and surpass 120 mill dwt in 2011. This massive increase in the fleet is sure to affect market rates and we can see the proof of this by looking at average capesize earnings which have fallen from a peak close to $ 230,000/day in mid-2008 to less than $ 30,000/day now.

Friday, 3rd December 2010

How fast will the tanker fleet grow?

The crude /dpp fleet will grow by around 6% this year, 9% next year and just under 9% in 2012. The cpp tanker fleet will grow by around 6% this year and another 6% in 2011 but by under 4% in 2012. That’s just a guess – but here’s how we got there.

Friday, 3rd December 2010

Why is potash so interesting?

Rising populations and shrinking agricultural land per person means crop yields will have to increase significantly to cater to the growing global population which is almost reaching 8bn by 2020 according to IMF statistics. Potash for fertilizers addresses this issue hence the global race for scale in the market.

Friday, 26th November 2010

Oil demand - oil production = oil imports?

If you know that a country consumes more oil than it produces, can you assume that the difference will
need to be imported either as crude oil or refined product? Well, yes, more or less. But does that mean that if you know how much oil a country will need and how much it will produce you can tell how much it will need to import? Unfortunately that’s where it gets a bit tricky.

Friday, 26th November 2010

Iron ore in Africa

Can a continent as politically and physically hostile as Africa really boost exports of iron ore eight fold within the next 10 years?

Friday, 19th November 2010

Long‐term oil demand growth

The IEA's recently published World Energy Outlook suggests three alternative growth projections for oil consumption, each depending on how effectively the world's governments respond to climate change.

Friday, 19th November 2010

The supply and demand scissors

Should we be concerned about the growing fleet size or can global demand keep up?

Friday, 12th November 2010

Could China give us a winter spike?

VLCC rates are moving back up. After peaking at around WS80 last week, the market appeared to run out of steam and with WS60 done on Thursday there were fears that we were heading back down to the lows of 3 weeks ago. But the market has shown resilience and rates have stabilised at WS65. The cargo count this year has surpassed all expectation and, despite the apparent oversupply of tonnage, for much of 2010 rates have provided owners with healthy returns. Why? In a word, China.

Friday, 12th November 2010

The changing face of Canadian ore

Canada’s production of iron ore currently stands at 40Mtpa. By global standards, it is a small player in the market, however, the recent explosion in iron ore prices and new projects under way are about to change that…

Friday, 5th November 2010

Bending the truth, a bit

The world’s six largest crude oil importing regions: the USA, China, Japan, S. Korea, Europe and India
together account for about 75% of global oil imports according to BP’s data for 2008. It would follow,
therefore, that if you could plot how much dwt of crude tanker capacity these countries / regions soak
up each month against how much crude tanker capacity is available in the spot market, you could
explain 75% of the movement in freight rates. Well, with a little statistical manipulation, we think we
can.

Friday, 5th November 2010

Congestion

The amount of vessels waiting to berth is often said to be 10% of the total fleet. Can investment in port infrastructure relieve the blockage? Unlikely…

Friday, 29th October 2010

Next step for ESPO will hit crude trade

At some point between now and January next year Russia will begin pushing 300k b/d through a newly constructed pipeline linking the ESPO at Skovorodino to Daqing in China. This will dent China's long‐haul
seaborne imports ‐ which leapt in September to 5.58m b/d ‐ but rising demand should quickly make up for the loss.

Friday, 29th October 2010

Freight and bunkers: Pull or Push?

The complex relationship between freight rates and bunker prices makes it difficult to predict how the market will move. One thing that is certain is that bunker prices are making up an increasing percentage of gross freight income, as much as 60% in some instances…

Friday, 22nd October 2010

Oil trade growth could double next year

It might seem hard to believe given that oil demand growth is almost universally accepted to slow next year, but we could be about to see oil imports increase by nearly 1m b/d in 2011. That is almost double this year’s growth.

Friday, 22nd October 2010

Indonesian Coal – Some data and a thought

Indonesia’s proved reserves (4,328 Mt - 0.52% of world) are only a tiny fraction of its total coal resources estimated at 93.4 bn mt as a result this industry’s expiry date is not drawing to a close any time soon. Indonesia is the second largest exporter of coal and the 5th largest producer of coal in 2009.

Friday, 15th October 2010

Panel beating drum for tankers

A panel of market experts convened on Tuesday in the London Stock Exchange to discuss future
prospects for the crude and product tanker sectors. The Tanker Sector Panel – one of a series of market and investment-focused panels organized by Capital link, was moderated by our head of Research, Henry Curra and included the following panelists: Mr. Nic Reardon Smith, Director, Research & Project Management, d’Amico International Shipping, Mr. Simon Chattrabhuti, Head of Tanker Research, ICAP Shipping, Mr. Richard Moore, Chief Commercial Officer, Pyxis Maritime and Mr. Laurent Bozzoni, Managing Director, Socatra.

Friday, 15th October 2010

Grain of hope for Panamaxes

Thank grains for increasing seaborne trade volumes. In the short term supply constraints (Russia’s export ban and poor harvests) lifting grain prices and a sliding greenback bode well for export volumes. Whilst in the longer term it seems as though the planet’s misfortune (drought, famine and food insecurity) may keep the Panamax market buoyant as the need to transport foodstuffs to populous poor countries rises.

Friday, 8th October 2010

Deliver us from Q4

With just three months of the year remaining, a full 30% of 2010’s new buildings have yet to emerge from the yard. Even by last year’s standards that is a lot. What is the likelihood that they’ll all be loading cargoes this side of Christmas?

Friday, 8th October 2010

China: economic downturn?

Official estimates point to slower growth for the Asian giant in 2011. The IMF projects a slowdown in growth from 10.5% in 2010 down to 9.6% in 2011.

Friday, 1st October 2010

Paper and TC: faux amis?...

A disagreement that has been rumbling away for years between our period and paper desks bubbled to the surface this week. It goes something like this: our physical desk claims that the relationship between time charter rates and paper is at best tenuous – at worst non-existent. Our paper team, on the other hand, is urging the market to wake up to the fact that paper and TC markets should not, and increasingly do not operate independently of each other. They are, of course, both right.

Friday, 1st October 2010

Biomass vs Coal

Environmentally-friendly energy sourcing is becoming increasingly popular and the growth of biomass as a ‘renewable’ fuel is likely to become important in seaborne trade. Already in countries like Sweden, biomass is the primary energy source (2009). What effect will this have on the roaring consumption engines of China and India and what role will coal play in a future of political pressure and environmental consciousness?

Friday, 24th September 2010

Indian products in the Atlantic Basin

Here’s the proof. India’s fast growing share of US gasoline and European gasoil imports has been much discussed, but only in the past few months has it begun to appear on European and US import stats.

Friday, 24th September 2010

India turns off the Iron ore tap

With the commencement of Karnataka’s export ban of iron ore in an attempt to tackle illegal mining, China’s supplies will be affected. China imports 110mtpa of iron ore from India with 40mt of it coming from Karnataka. In the grand scheme of things this amount may seem insignificant but how will this affect trade patterns with Australia, Indonesia and South Africa?

Friday, 17th September 2010

Juggling the orderbook

A report this week stated that 35% of the orderbook for product tankers would not deliver. Why 35%?
Why not 50%, or 12%? It makes such a big difference to the ability of the growing tanker fleet to find
employment that there must surely be some scientific basis? We suspect not. But is there anything
intelligent we can say about the error margin on today’s scheduled tanker deliveries?

Friday, 17th September 2010

Coal Demand Weakens

Correction to an overshot market or sustained downturn? In the short to medium term coal demand is dampening with the onset of Autumn in the Northern Hemisphere and China’s lower electricity usage. But will weaker freight rates be taken advantage of to boost the demand for coal?

Friday, 10th September 2010

Oil Co’s lost appetite for ordering

As part of a study we are doing on NB financing these graphs show how the type of company ordering tonnage has changed over the years. They show not just how enthusiasm for NB ordering has tumbled since 2006 but also how investment from oil companies – state-owned or otherwise – has all but dried up, while PLC’s, which barely featured in last year’s NB contracts, are back with a vengeance

Friday, 10th September 2010

Quotes of the week

A little less upbeat on Chinese economic growth. Commodity prices up; strong demand for sugar and tight supply of wheat drives prices upward.

Friday, 3rd September 2010

How do you tell if a fleet is over-built?

Question: If the VLCC orderbook represents 36% of the existing VLCC fleet, and the Suezmax orderbook represents 40% of the existing Suezmax fleet, which sector is more over-ordered?

Friday, 3rd September 2010

Supply and Demand

The market for iron ore has come a long way in the past 10 years. The key players have played musical chairs in the rankings and now a significant period of expansion in production is coming to meet the needs of the roaring engines of China.

Friday, 27th August 2010

What will Suezmaxes earn in 2011?

In last week’s report we asked to what extent VLCC fleet growth was running ahead of oil demand, and how much it could afford to. This week we apply the same approach to the Suezmax sector.

Friday, 27th August 2010

Stockpiles or not?

Are we coming to genuine over supply with a growing global fleet? A close examination of this may show a different picture.

Friday, 20th August 2010

What will VLCCs earn in 2011?

Cal 11 on TD3 is currently trading at around $35,000/day. It’s not a great return for a round voyage, but
given that TD3 managed just $24,500/day over the course of 2009, it could be a lot worse. Then again
we all thought 2010 would be weak, and we’ve averaged around $44,000/day so far. The question we
have to ask is… do the fundamentals, as we see them today at least, justify it?

Friday, 13th August 2010

New refineries: who wins?

Who is building new, or expanding existing, or closing old refineries, and where, and will it help product tankers, or crude oil tankers, or both? Not easy questions to answer, but the IEA’s outlook for crude distillation capacity additions (left) is a good place to start.

Friday, 6th August 2010

Chinese demand: keep the faith

Does a cooling economy spell the end of China's astonishing oil consumption growth? Hardly. But that doesn’t entirely let tanker owners off the hook.

Friday, 30th July 2010

Flat rates ‐ where do we go in 2011?

With only 5 months to go before we welcome in a new year, we thought we might take a look at a selection of projected 2011 WS flat rates. With only 3 months of average bunker prices needed to establish the rates for 2011, we now can calculate with a fair degree of certainty the estimated bunker price.

Friday, 23rd July 2010

What does 2011 have in store?

The big forecasting agencies have finally dared to look into 2011. The IEA is expecting global oil demand to rise by 1.3m b/d to 87.8m b/d. The EIA believes it will grow by 1.5m b/d to 87.3m b/d. OPEC reckons it will grow 1m b/d to 86.4m b/d.

Friday, 16th July 2010

Old double hull? No thanks

Who will take a 16 year old tanker on time charter? At the beginning of the last decade, pretty much anybody. Over 30% of all time charters involved vessels over 15 years old. Today – with a larger pool of younger ships to choose from and a growing fear among charterers of being implicated in an oil pollution incident - hardly anyone.

Friday, 9th July 2010

The great Suezmax gamble

So far this year 39 orders for Suezmax tankers have been placed at a cost of roughly $2.5bn. This brings the order book to 141 ships – 41% of the existing fleet. Newbuilding prices may have given ground in the past two years but this still represents a remarkable vote of confidence in the
outlook for Suezmax earnings. We wonder if this confidence is justified.

Friday, 2nd July 2010

Life after the single hull ban

Would the removal of the world’s remaining single hulls make the tanker fleet shrink in the second half of the year? Yes it would. Trouble is it is now clear that well over half the world’s single hull fleet isn’t going anywhere.

Friday, 25th June 2010

MRs: Back from the abyss

Over the past two weeks a moribund MR market in the West has leapt back into life. Rates for MRs moving gasoline from North West Europe to the US have jumped W52 points, lifting round voyage TCE earnings from little over $4,000/day (well below operating costs) to around $12,000/day (comfortably above opex).

Friday, 18th June 2010

What do they know that we don’t?

Oil is rapidly becoming ‘the new tobacco’ according to an influential UK paper this week. The view came as the slick created by the Deepwater Horizon explosion grows to what analysts believe could already be as much as 3.25m bbls – 13 times as much as the ExxonValdez.

Friday, 11th June 2010

Fleet growth: six months on

The question was raised this week as to how, if at all, our view of fleet growth has changed in the past 6 months. Since last December we’ve trimmed our delivery schedule slightly as on aggregate more delivery dates have been pushed back than brought forward.

Friday, 4th June 2010

Flat rates heading north again

With only four months remaining before the bunker price that feeds the 2011 flat rates is published we should have a reasonably good idea of how they will look.

Friday, 28th May 2010

Have LR2s got what it takes?

LR2s have been looking pretty hot this past month, relative to the rest of the market. The sector has
benefitted more than any other from floating storage of gasoil and jet; crude trades have been soaking
up a growing number of coated units and, to top it all, LR2s are the natural choice to handle expanding demand for Middle Eastern naphtha in the East and more recently an opening arb for naphtha from the Middle East to Europe.

Friday, 21st May 2010

Product Tankers TCs back in vogue

As witnessed by the attached fixtures report, this week has seen a marked improvement in the volume of business concluded on the time charter front in the product tanker sector.

Friday, 14th May 2010

Demand at a Glance

This week’s downward revisions for oil demand in 2010 by the IEA – its first in 5 months - disguises what is actually a more optimistic view on the health of the world economy.

Friday, 7th May 2010

Singles Abound

April proved something of a disappointment for d/h owners after March’s soaring levels of single hull ‘recycling’. The sale this week of five single-hulled VLCCs s to dry bulk operator Vale provides some encouragement, and perhaps an indication of things to come, but we still have a stack of single hulled vessels to plough through.

Friday, 30th April 2010

Upbeat mood lifts assets

Criticism of the value of the VLCC tonnage in Saga’s recent usd 120m private placement in Oslo maybe overstated. There is some cynicism over the inflated price of usd 67 million put of the 2 Blystad VLCCs the 'Agnes' and the 'Julie' - sold into the Blystad-generated company Saga tankers and the subsequent purchase price of the Sanko Unit.

Friday, 23rd April 2010

How did we get here?

Two years ago (April 2008), we were expecting the crude tanker fleet to grow by 9.6m dwt during that
year. In fact it grew by 2.4m dwt. At that stage we had no idea quite how much tonnage conversion
buyers would suck out of the market. By happy coincidence, however, we estimate that the ‘useful
crude carrying capacity’ did grow by about 9m dwt thanks to increased sailing speeds and the defection
of some coated tankers from clean to dirty trades to take advantage of stronger rates.

Friday, 16th April 2010

First Quarter Surprises

Average TCE spot market round voyage returns for the first quarter of this year have come in well above what most people were expecting to see half way through last year.

Friday, 9th April 2010

Fixing windows: cause and effect

We all know a relationship exists between how far forward charterers are fixing VLCCs and the strength of the market. But can the forward fixing window tell us anything about where today’s rates are heading?

Thursday, 1st April 2010

Easter bunny hop for crude freight

From such quiet beginnings to a short week the crude market has burst into action. VLCC rates jumped from the mid W70s to mid W80s. Thanks to last month’s high volume of spot fixing in the
Middle East, tonnage was tight up to mid month. Charterers dutifully trotted in to cover before the
Easter break, not that Easter really registers as one of the big Eastern holidays.

Friday, 26th March 2010

$20,000 to become a pirate

Being attacked by pirates is one of many risks, insurable or otherwise, that ship operators will face from time to time. You do what you can to avoid attacks: you skirt the areas the pirates infest; you travel in the company of other vessels. You learn a few tricks to shake them off when alongside. But you won’t stop pirates having a go, and you probably won’t stop a few of them getting away with it. This was the rather unsettling message that Rob Andrew, a piracy expert, delivered to ACM’s chartering clients in a presentation this week.

Friday, 19th March 2010

The pitfalls of counting fixtures

More VLCCs have apparently been fixed on the spot market to load in the Middle East this month than
at any time since October 2008. As tempting as it is to conclude that oil demand is surging, it is more
likely to be doing quite the opposite.

Friday, 12th March 2010

A big draw on distillates

The past week has witnessed the biggest draw yet of distillates from floating storage. In oil terms we have seen 17.13m bbls (or 24.1%) of gas oil removed, almost entirely in North West Europe, and 2.33m bbls (or 20.5%) of jet.

Friday, 5th March 2010

Different Expectations

More and more we hear our clients quoting the FFA forward curve as a reference for the direction of the physical market developments and not only as a tool to manage risk and hedge exposure. The front 4 qtrs traded in FFAs should tell us the expected TC rate, we hear more frequently stated and used as an argument.

Friday, 26th February 2010

The (a) Grand Unifying Theory

Despite a recovery in recent months, global oil demand is still some 1.3m b/d short of its peak at the end of 2007. Fleet growth since 2007 has required crude tankers to lift 2.84m b/d more crude, and product carriers to lift 5.92m b/d more products. So how on earth is almost every tanker in the world fleet still fully employed?

Friday, 19th February 2010

The Great Shift East

The Atlantic basin is awash with oil, yet Asia can’t get enough of it. Oil companies are therefore rapidly
shifting their focus. New pipelines are being built; flow of existing pipelines is being reversed; national
oil companies are swapping Western storage capacity for tankage in the Far East; Eastern owners are hoovering up the world’s tanker fleet. What could this all mean for long-haul tanker trades?

Friday, 12th February 2010

Ignore ton-miles at your peril

The question was raised this week as to whether the loss of tanker demand from Europe and North
America was being compensated by growing demand from China. Despite what the relative oil
consumption numbers suggest, the answer is a resounding ‘yes’ – but unfortunately for tanker owners, that’s not the whole story.

Friday, 5th February 2010

Storage update

Here are our latest numbers on oil in floating storage, showing our projection for oil coming off storage over the next two weeks.

Friday, 29th January 2010

Intermediate tankers: a prognosis for 2010

Though the global economic slowdown has clearly hurt the intermediate tanker sector (10,000dwt to 17,999dwt), the seeds of its decline were sown back to 2004. As a result it will take more than economic recovery to make up for past mistakes.

Friday, 22nd January 2010

VLCC rally: down but not out

The gains of the last ten days on VLCCs have quickly evaporated. As far as we can make out, that’s
largely down to sentiment.

Friday, 15th January 2010

Product Carriers: A prognosis for 2010

The cold northern hemisphere winter has picked product carrier earnings off the floor. Demand has
improved, weather delays have upset loading programmes forcing charterers to rush through
alternative arrangements, and ice class tonnage is at long last receiving premium rates. But not all the news is good. The rise in heating oil demand and hike in freight rates (particularly for Suezmaxes) has sucked gasoil out of floating storage, and if this begins to push LRs back into the spot market we will soon see greater competition for spot cargoes. Here is our view of how things will pan out over the course of the year.

Friday, 8th January 2010

VLCC: A prognosis for 2010

As the VLCC market starts to move, we look at the sector’s prospects for 2010 and against most peoples' expectation, conclude that we could see some strength returning to rates this year.

Friday, 25th December 2009

Beware January Deliveries!

January 2010 is shaping up to be a very busy month for newbuilding tanker deliveries. Generally weak
market conditions have already pushed a large number of 2009 deliveries into 2010. This trend has
accelerated in recent months as the appeal of a 2010 build date outweighs the benefit of participating in the small upswing in December rates. A good deal of this tonnage will come on stream in January, which we expect will put downward pressure on rates.

Friday, 18th December 2009

VLCC market strength explained

The VLCC market in recent times has strengthened and owners are fetching returns that for the most part of the year could not match. Supply/Demand enonomics are more in balance than they have been for many months and this has helped owners lift this market out of the doldrums. There has been constant demand for VLCC’s storing both Crude oil and Clean Petroleum Products.

Friday, 11th December 2009

Copenhagen: bad news for tankers?

The ‘peak oil’ debate has always had an inherent weakness. If and when conventional oil supply does eventually struggle to keep up with demand, the rising price of oil will justify the exploitation of more energy intensive ‘unconventional oil’ – Canadian tar sands and the like. But what if governments decide next week that the ecological cost of doing so is too high?

Friday, 4th December 2009

What can VLCCs earn?

With three weeks to go until the end of 2009 it looks like round voyage earnings for VLCCs trading
between the Middle East and Japan (TD3) will come in at an average of around $24,000/day for the
year. That’s $62,500 less than some paper players were willing to gamble in the summer of 2008, and $18,000 per day less than the numbers being talked this time last year. Other than proving that paper traders are no better than the rest of us at predicting the future, do these numbers mean anything in the real world?

Friday, 27th November 2009

China's 145 VLCCs

An article in TradeWinds today informs us that by 2015 China will require 145 VLCCs. Quite by coincidence, that’s probably not far off the mark. The latest available statistics suggest that China’s crude imports were back up to 4.5m b/d in October – just shy of their highest ever level in July this year.

Friday, 20th November 2009

Before we get too carried away...

Judging from what we read in the papers, the market still seems to believe that 90 single hull VLCCs will need to be replaced at some stage next year. On the basis that 85 newbuildings (max) will deliver between now and the end of 2010 this suggests, as a number of commentators have pointed out, that the VLCC fleet is about to shrink. We have a few problems with this.

Friday, 13th November 2009

A few changes to the report this week...

Fleet Statistics: until now we have been estimating net fleet growth for each sector as a %. From this week we show how we arrive at our numbers – i.e. the number of newbuildings we expect to deliver each year Vs. the number of older ships we expect to see removed (either scrapped/converted or simply never again moving oil around the world).

Friday, 6th November 2009

Flat rates fall 21.5%

The 2010 Worldscale flat rates for the main BITRA routes have been released. With the exception of small changes to voyage distances, all components of the flat rate are now transparent. Next year’s flat rates show an average decrease on 21.4% on 2009 levels.

Friday, 30th October 2009

Structural product trades under threat?

In an ideal world an oil refinery would be able to chose feedstock according to its relative value, and tweak its product yield according to changing consumption needs. Fortunately for product tanker owners, it rarely works out like that. But with refining capacity now expanding faster than demand - and forced to address a massive overhang of distillates - this could be about to change.

Friday, 23rd October 2009

A positive spin on storage

No one disputes that floating storage hangs like a sword of Damocles over the tanker market. The only debate concerns when it will fall. It was, in fact oddly still is, broadly accepted that a narrowing contango would spell the end of the storage bonanza. But storage charterers for crude oil, where the contango for WTI and even Brent has been virtually non-existent for some time now, still employs 30 d/h VLCCs. So why does the market now insist more fervently than ever that storage is a spent force? If anything, we believe the opposite. And the sooner owners realise this, the sooner they will be able to challenge the dire returns they are forced to accept.

Friday, 16th October 2009

It's Life Jim...

When we last counted ships at the end of May this year we could see little reason to predict a rally in
VLCC earnings. This was despite our conviction that peaking demand for floating storage and the
growing inefficiency of the VLCC fleet had actually left the market reasonably well balanced. The
problem then, as we saw it, was sentiment. But since May oil demand has rebounded fast, while floating storage volumes have held steady. This week’s WS 5 point rise on TD3 suggests the owner’s mood could at last be lifting. Could the VLCC market turn?

Friday, 9th October 2009

VLGC owner questions 'market-related' logic

The past 12 months have been particularly difficult for VLGC (very large gas carriers) owners. Idle time has been a constant feature of the market as average spot returns have hovered around $5-7,000 / day. It is easy to conclude that owners have simply ordered too many ships. But according to one large lpg owner, that's not the only 'own goal' VLGC owners have scored.

Friday, 2nd October 2009

Storing up trouble

Forecasting tanker supply is a tricky business. If you simply balance projections for newbuilding deliveries against a projected phase out of s/h tankers you can at least not be proved too wrong. The problem is that the 'ships in / ships out' model only paints part of the supply picture. Here, at the risk of being ridiculed in a year's time (or less) we try to paint it all.

Friday, 25th September 2009

MRs undervalued?

If past earnings indicate that VLCC earnings could fall further next year than the paper market suggests it will (as we argued last week), they would also suggest that paper has under priced MRs.

Friday, 18th September 2009

$25,000/day next year?

This week we are dropping our one year TC rate for a VLCC from $34,000/day to $31,500/day. The paper market is more bearish still - it expects $25,000/day to be a more realistic number during 2010. But with the spot market for VLCCs averaging just $8,000/day for the past three months - could even paper be aiming too high?

Friday, 11th September 2009

China : using oil or hording it?

It won’t be long before China overtakes the US as the world’s biggest employer of crude oil tankers. That presents a problem for those charged with forecasting tanker demand.
As this month’s large upward revision in Chinese 'apparent' oil demand (refinery output plus net oil product imports, adjusted for fuel oil and stock changes) from the IEA highlights, nobody really knows what to expect from China. This is largely because no one (outside the Chinese administration, one would hope) has much of an idea what is happening right now.

Friday, 4th September 2009

Will scrapping help?

Recycling of older single-hulled tankers (and one double-hulled tanker) has gathered pace this week with another two VLCC and three MR1s heading for the beach. The combination of weak freight market, attractive scrap prices ($370/ldt), a gloomy medium-term market outlook, depressed second-hand prices and limited conversion opportunities* will see more go. But with so many new ships entering the market, a high level of scrapping is essential. We fear it won’t, it itself, be enough to lift the market.

Friday, 28th August 2009

Time to go

Bangladesh is currently talking around $380 per lightweight ton for large tankers. If owners were
planning to ‘recycle’ their single hulls, or older double hulls for that matter, at any stage in the next two
years, now would seem a good time to do it.

Friday, 21st August 2009

Gift horses: where to look

In February this year chartering tankers to store clean products was almost unheard of. Today, traders
are storing over 100 million barrels of distillate at sea. But despite this mass exodus of capacity from
clean spot trades into floating storage, clean rates have continued to plummet. Could this be about to change for LRs?

Friday, 14th August 2009

Never underestimate Asia!

We made the mistake in 1997-98. We made it again in 2001. This week's second quarter economic growth statements suggest we may have underestimated Asia's ability to bounce back once again.

Friday, 7th August 2009

Appeal necessary?

With the tanker market generating very low returns since spring, and an apparent consensus that things aren’t looking up in the short term, scrapping of old tonnage should be rising on the tanker owner’s agenda. But is it?

Friday, 31st July 2009

Structural Decline of Fuel Oil?

For years the total volume of fuel oil transported has fallen because of substitute feedstock, mainly gas and coal. This was at least in part balanced by the ever increasing fuel oil consumption of the growing fleet of vessels hauling the goods around the world. But the economic downturn, reduced shipping activities and the anticipated shift of bunkers from heavy fuel to middle distillates during the next 10 years has apparently left fuel oil demand heading for structural decline.

Friday, 24th July 2009

Where's that 'globalised' products market?

Wasn't the global trade in refined products going to explode in 2010? Weren't some 50 new refineries going to start up, most of them in developing countries, and most of those designed to feed burgeoning demand in the rich world. Wasn't it next year that the long-haul product tankers were to take over the show?

Friday, 17th July 2009

Close but no cigar

This chart – extrapolated from BP’s annual statistics on world oil trade – gives an idea of the complexity of the world’s product trade and the limitation of forecasts based on oil demand growth alone. But does it say anything useful about the future?

Friday, 10th July 2009

IEA spies recovery, of sorts

The IEA’s first monthly report to include an outlook for oil demand in 2010 suggests growth will return
next year to the tune of about 1.4m b/d. So by the end of next year we would have clawed back about
half the demand we lost over this past 12 months. Two years of growth at that level and we’ll be back to where we were before the crisis hit. The only problem is that by then, failing some major shipyard
failures, we could be sitting on 36% more product carrier capacity and 32% more capacity to move crude oil.

Friday, 3rd July 2009

Intermediate tankers: when is enough enough?

We’ve got to hand it to the intermediate tanker fleet – it can take a beating! As the fleet statistics below
make clear, chemical and product tankers between 10,000 dwt and 17,999 dwt should currently be
dragged under by a tide of newbuildings. This year will see 230 newbuildings added, equivalent to 27% of the existing fleet, making the intermediate sector by some margin the most overbuilt of all tanker classes this year.

Friday, 26th June 2009

When?

This is the most popular word in today’s world. When will the market pick up in a sustainable way again? This is the question mostly discussed with our clients. This discussion is always centred around the next important question: Did the TC market bottomed out? Will we see lower rates then the rates we asses in the moment and which form part of this report?

Friday, 19th June 2009

Houdini would be proud

For anyone scratching their head as to how dumping the equivalent of half a day’s global oil consumption from floating storage into the US and Europe over the past few weeks has failed to depress oil prices, this graph provides a good answer. But could it also show the way for tanker owners to cheat this recession?

Friday, 12th June 2009

Does this rally have legs?

VLCC spot earnings have jumped some $30,000 a day over the past two weeks. In the history of bear markets, there is nothing unusual about this. We've had three or four jumps of this magnitude since last July only to see the market drop away as quickly as it rose. None did anything to halt the decline in time charter rates or asset values. But this rally feels different.

Friday, 5th June 2009

Long-term charters are back

This week Koch, S Oil, BP, Petrobras and Reliance have come into the market with TC enquiries for 18 months or longer. This marks the end to well over a year of drought for long-term period activity on VLCCs and Suezmaxes. But what does it tell us about where those markets is heading?

Friday, 29th May 2009

Do the maths...

We have lost about 10% of VLCC demand since last autumn. This is a rough calculation
based on the number of reported spot fixtures loading out of the Middle East, and
assuming 3.3m bpd of production lost – almost all out of the Middle East. This equates
to about 50 fewer VLCCs required to move the world’s oil.

Friday, 22nd May 2009

Fat lady singing on storage?

Oil prices have jumped 85% since February. Odd, you might think – given how far oil demand has fallen. But in our view this rally is not about today’s fundamentals. It is about what happens when the recovery comes, and it assumes storage will bridge the gap until it does. If this is indeed the case, could this then mean that contrary to what has been suggested these past few weeks we have yet to see the peak of storage charters?

Friday, 15th May 2009

To "V" or Not To "V"

Alas, despite a concerted effort of wishful thinking by most in our industry, we have not witnessed an improvement in VLCC owners’ malaise. Current Spot employment from MEG has continued to ebb and flow in the $3,000 – 7,000 / day range, whichever point of the compass one seems to be ordered for discharge. Not exactly mesmerizing. For those fortunate to be in the west and able to secure west African barrels for destination to the U.S. , earnings are in the region of $13,000 – 15,000 / day.

Friday, 8th May 2009

Not such a paradox

The worse this VLCC market gets, the more attractive the sector becomes – or so it would appear. While the spot market continues to be beaten into submission, tanker company stocks are rising healthily and forward freight contracts are changing hands at increasingly lofty levels. So is this a reflection of renewed confidence in the sector, or simply recognition of how bad things currently are?

Friday, 1st May 2009

Luck or judgment?

In November 2007 things were looking pretty bad for tanker freight. Rates had been sliding for six months and earnings were beginning to test breakeven levels. A tidal wave of newbuildings was about to flood the market and oil demand was expected to grow only modestly (in fact it shrank). The fact that in the face of all those negative forces 2008 turned out to be one of the best on record for tanker owners should give today’s ‘bears’ pause for thought. But it won’t, and probably for good reason.

Friday, 24th April 2009

How low can you go?

Our time charter team reckons one year TC rates are now, on average, half what they were in October last year. Though spot rates have surfaced after their recent dunking, charterers still clearly believe time charter levels have further to slide. So when will they finally judge the bottom has been reached?

Friday, 17th April 2009

Recession 101

This is not the 1980s. But as rates tumble, owners will doubtless be leafing through their note books to see what they did the last time they faced such a rapid build up of prompt tonnage, and such a bleak market outlook.

The tanker market in the 1980s was indeed bleak. Before the market peaked in 1973 it already seemed unlikely that oil demand would keep pace with the speculative ordering of the early 1970s. The Yum Kippur War turned the improbable into the impossible by hiking the oil price and crushing crude import demand.

Thursday, 9th April 2009

Different Times

The tanker market is very different today compared to a year ago. Returns in the spot market have dropped considerably during the last two weeks. Rates for all sizes of crude oil tankers are down 75 product carriers have not escaped this either, down by an equivalent margin. This comparison needs to be looked at with a certain amount of caution, as it only shows a snap shot in time and does not show the substantial annual volatility in spot rates and returns, but it still makes gloomy reading.

Friday, 3rd April 2009

Big brains provide hope

A recent ‘poll’ of oil analysts conducted by Reuters suggests that oil prices will hold at current levels for the rest of this year, rise to about $66 per bbl in 2010 and rise again in 2011 to $79 per bbl. What interests us in all this guesswork is not the numbers themselves, as frankly there is not a hint of consensus among the institutions polled, but the possibility it raises that the low point in the oil market has been reached.

Friday, 27th March 2009

Still want your newbuilding?

Some clients have been asking how yards are coping with their commitment to build, and owners with their commitment to take delivery of the second largest tanker order book in history. This is what we are picking up...

Friday, 20th March 2009

A tough quarter ahead for VLCCs

March 2009 was one of the lowest levels of VLCC liftings for many a year. It looks like the final figure will be sub 80. So how do we explain that? Well, yes, because OPEC is adhering much better than usual to output pledges. They were already 80 per cent of the way towards achieving their 4.2m b/d target cut when they convened last week. But the bigger question is how they are able to hold it together so well. The temptation to go outside the agreement is still strong.

Friday, 13th March 2009

Europe's tariff rocks biodiesel trades

European biodiesel blending targets were supposed to improve ecological sustainability and reduce dependence on foreign imports (notably of crude oil). This week’s imposition of tariff’s on Europe’s biodiesel imports from the US shows just how difficult that second goal is to achieve. Fortunately for the shipowner, it will take a lot more than that to stamp out a growing transatlantic trade in biofuels.

Friday, 6th March 2009

US oil demand to the rescue?

Like it or not – and despite the best efforts of China to steel the limelight – the USA still takes centre stage when it comes to tanker demand. As the trigger (and accelerant) for the world’s current economic woes, the US therefore shoulders much of the blame for bringing an unprecedented 6‐year tanker freight rally to a shuddering halt. But does this mean we have to wait for the US economy to bounce back before tanker demand returns? There are two reasons to think not.

Friday, 27th February 2009

Bulls Vs. Bears - Our Take

Hopefully you are all familiar with out market outlook presentations by now. They typically start out with a look at the key short, medium and long‐term market movers; their likelihood; and their potential impact on freight for each sector of the world fleet. The world and his dog seems now to be convinced that freight is heading south, so what better time to remind you that there are still diverging views out there – views that are, in our opinion, still worthy of serious attention.

Friday, 20th February 2009

Who's afraid of the big bad orderbook?

With the world needing less oil, it will need fewer ships to move it. For this to happen existing ships will have to be removed faster than new ships can be delivered. And for this to happen, we all agree, the orderbook will have to shrink. But how likely is this?

Friday, 13th February 2009

Market commentary

Today’s TC estimates on most of the tanker sizes have been marked down again. This is a continuation of a general trend which started back in July/August 2008, and which now has accumulated in an average TC rate loss of between 25 and 35 percent. This sharp downward correction is not only closely correlated to the reduction in asset prices, but additionally very similar on average in percentage terms.

Friday, 6th February 2009

VLCC rebound next year?

The VLCC market peaked earlier, and rather less impressively, than we thought. It now looks unlikely owners will claw back lost ground for the balance of the year. That’s the bad news. But on the bright side this could well bring forward the scrapping of single hulled tankers, which could in turn help rates rebound considerably earlier than we expected.

Friday, 30th January 2009

Market commentary!

You will have noticed that over the last two weeks we refrained from writing a preamble to our period report. This was not down to a lack of interest, laziness or a lack of imagination. Sometimes, silence is golden and it is often better that we slowly and carefully try to analyse this market in the right context with the surrounding macro economic developments of energy consumption and transportation, combined with the expected fleet development in the next two years!

Friday, 23rd January 2009

Market report 23rd January 2009

Read more…

Friday, 16th January 2009

Market report 16th January 2009

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Friday, 9th January 2009

Charterers swallow new flat rate without blinking

What a week it has been! It started with many believing that the year would start much the way the last one ended spread out of the Middle East has all been squeezed into this week and, though it took until Thursday for it to take real effect. When it happened, the market shot up.

In fact soon after Worldscale 60 had been fixed on last year’s flat rates, Worldscale 60 was paid on the new Worldscale flat rates. With a 38 percent increase in the flat rate from 2008 to 2009 that’s a 38 percent jump in the V market almost overnight!

Friday, 2nd January 2009

The Reliance Effect

On December the 25th Reliance formerly commissioned its new 580,000 b/d refinery in Jamnagar. It won’t be until April that the plant gets up to full production but these next few months will give us a good idea of how trades for both crude oil and refined product will be affected. Impatient as always, here’s our latest guess as to how it will change the landscape for product (and crude oil) tanker trades.

Friday, 19th December 2008

Are you watching the right war?

OPEC’s battle with market forces to regain control of oil prices is raging fiercer than ever. Thanks to oil’s continuing slide after Wednesday’s OPEC announcement, vast cuts in crude oil output are being implemented. The tanker market, about to grow at its fastest annualised rate since the 1980s, is bracing itself for impact. But as we watch owners of all sizes of crude taker asset classes give in to lower spot rates this week, we can’t help but wonder…have they been watching the wrong battle?

Friday, 12th December 2008

Who will win the capacity war?

OPEC is poised to dramatically reduce the number tankers needed to move the world’s oil. Oil companies and traders, meanwhile, are rapidly reducing the number of tankers available to move it. Whichever emerges as the stronger force could have a profound impact on freight rates across the size spectrum. Unfortunately we know neither the precise number of tankers chartered (or simply used) to store oil, nor the scale of (or perhaps more importantly the level of compliance with) output cuts that OPEC is likely to pledge when it meets on the 17th.

Friday, 5th December 2008

Could LRs gain from Eastern products spilling West?

Despite slowing gasoline demand, high distillate cracks in 2008 caused refiners to maximize distillate production and export as much of it as possible, along with any surplus gasoline produced along the way. Overly-fixated on the tidal wave of new buildings bearing down on us, we didn't see that coming. What we'd expected to be a tough year for product carriers has turned out to be one of the strongest on record.

Thursday, 27th November 2008

Drivers of short-term freight: a progress report

With party season fast approaching, what better time to update a few of the bull / bear arguments we have raised in recent weeks.

Friday, 21st November 2008

Here's one for the geeks

Since the Sirius Star was hijacked 450km off the coast of Somalia earlier this week owners have been falling over themselves to avoid pirate infested waters. In reality this could mean anything from transiting the Red Sea in a navy convoy to avoiding the Gulf of Aden altogether. Indeed it could also mean nothing at all.

Friday, 14th November 2008

Have VLCCs been robbed of their swan song?

There is little doubt that OPEC cut backs in November are sucking the strength out of the VLCC market. If the price of oil continues to slide, further OPEC cutback pledges will come in December, suggesting VLCC rates will fall again. To the VLCC owner this must all seem just a little unfair.

Friday, 7th November 2008

Will the real optimists please stand up

The tumbling dry bulk market is polarising opinion in the tanker sector. One camp believes tankers are following bulkers into the abyss. The other is gearing up for a new wave of investment. There is no middle ground.

The drybulk market has certainly got the tanker owners in a spin. The fire sale of dry bulk assets is now in full swing. This week saw the first big-fleet casualty of the credit crisis as Allocean's parent company Allco went into administration. It joins Britannia Bulk Holdings, bankrupt after failing to sell off its fleet. Just the top of the iceberg, we are told. In fact if rumours are to be believed dry FFA margin calls could have claimed another four victims - some seriously big hitters among them - floored by a massive combined loss of $2.1 bn.

Friday, 31st October 2008

Build it, and they will come

The world fleet of small MRs will barely change over the next few years while the fleet of larger MRs is expected to grow by 40 per cent. A small MR costs significantly less than a large MR to built yet they will earn about the same in today's market. So why is hardly anyone building small MRs?

The easy answer is that MR cargoes are getting bigger as the centre of gravity for new MR business shifts East. But should ships always be built in response to changes in the parcel size charterers prefer to trade?

Friday, 24th October 2008

The arbs will be there, but will the traders?

Right now, trust is in alarmingly short supply among traders of physical or paper oil contracts. The collapse of Lehman's; the restructuring of the world's blue-chip banks and now the fear of an Argentinean or Pakistani default amidst worsening economic turmoil have all got traders spooked. For clean product tanker owners, this does not bode well.

Friday, 17th October 2008

And back to the dark side

Where there’s a silver lining, there’s a cloud. Despite the fact that our markets have real upside potential, as we explored last week, we still believe the bear arguments outweigh the bull.Driven by suppression and in some cases the outright destruction of oil demand, and compounded by strong fleet growth, our hunch is that this market will struggle to maintain its strength into next year.

Friday, 10th October 2008

A look on the bright side, for a change

Any chance we could emerge from this crisis unscathed? The question comes with an air of
desperation nowadays. Perhaps surprisingly (coming from us) the answer is a resounding yes.
It’s a slim chance, but we’re willing to accept that the right combination of factors, all well
within the realms of possibility, could keep both crude and product tanker markets buoyant for
the next two to three years.

Friday, 3rd October 2008

Market report 3rd October 2008

Today, the Worldscale Association announced that the bunker price to be used in the 2009 flat rate
calculation will be $554.05/ metric ton. This represents a 68% jump over last year’s price and we estimate it will have the following impact on flat rates for the main BITR Routes…